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The Hawks are trying to reduce the chances of QE



FMario Draghi (C), President of the European Central Bank (ECB), spoke on the flanks of Luis de Guindos, Vice President of the European Central Bank (ECB), and Christine Graf, Director-General for Media Communication, following a meeting of the Governing Council of the ECB at the Headquarters of the ECB on 7 March 2019 in Frankfurt, Germany.

Thomas Lones | Getty Images

Two senior officials tried to quell market expectations for an immediate quantitative easing of the package (QE) launched by the European Central Bank (ECB).

Earlier in the summer, ECB President Mario Draghi said he was looking for other avenues to support the 1

9-nation economy in the euro area, stressing that one of the options included a new asset purchase program to stimulate lending and increasing inflation.

Investors welcomed their comments with ECB members such as François Villaré de Galhau, emphasizing that a core bond repurchase program, also known as QE, could occur in the coming months if necessary.

But just as investors were preparing for the next ECB meeting on September 12, two particularly hawkish members of the central euro area bank decided to bring some reality back into the debate.

"In my opinion, based on the current data, it is too early for a huge package," Executive Board member Sabine Lautenschleiger said in an interview with Market News this week, which was published on the ECB's website on Friday.

"I am still convinced that the Asset Purchasing Program (APP) is the ratio of endpoints and should only be used if you have a risk of deflation; and the risk of deflation is no longer visible."

Colleague ECB Member and Dutch Central Bank chief Klaas Knott added his own words of caution. "If deflationary risks are back on the agenda, then I think the asset purchase program is the right tool to activate, but there is no need for it at the time of my reading of the inflation forecast," he told Bloomberg in a statement. Thursday. [19659002] But there is only a muted market response, as these comments with European stocks post gains both Thursday and Friday. Rabobank analysts deny this to traders who are already aware that there was no consensus among members of the ECB's QE board.

They also point out in a research note that the reason hawks "raise their objections so loudly that they know that it is very likely that APP will be restarted immediately. "

If implemented, it will be the second time in its history that the central bank announces a large-scale cash injection program in the euro area economy.

Last week, Eric Nielsen, chief economist at UniCredit Group, predicts that QE will start in September and could reach between 300 and 400 billion euros ($ 333.07 and $ 444.10 billion) over a nine-month period.

The euro area is still struggling to cope with its low levels of inflation and According to the most recent forecasts of the Central Bank, headline inflation is expected to reach 1.3% in 2019 – the ECB's target is "below but close to 2%" in June. 2018 has grown at a rate of 1.8%.

Sylvia Dahl & # 39; Angelo, a senior economist at Hermes Investment Management, told CNBC via email last week that he would not rule out the ECB's open approach.

" An ECB official recently took the case for a stronger course. There is likely to be more than a smaller program, say € 45 billion a month in one year, "he said.


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