ECB

Comment on the latest ECB council meeting (June 14)

The ECB is sending a clear signal that it will exit its QE program by the end of this year. The ECB’s announcement is courageous as risks to the euro area outlook have increased significantly in recent months. Yet the announcement is wise as the ECB needs to prepare markets early in order to avoid the Fed’s taper tantrum of a few years ago.

Yet the ECB is maintaining enough flexibility to react to risks, should they materialize. Unfortunately, it … [continue reading]

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ECB Monetary Policy

Comment on the latest ECB council meeting

The rising global uncertainty is now making it much harder for the European Central Bank to identify the right timing and speed for exiting its expansionary monetary policy stance. I still expect the ECB to end its QE program by the end of 2018, but the ECB will need to change its communication strategy. In order to remain flexible the ECB should not pre-commit itself to a particular policy path. This will fuel German objections, but it is important for … [continue reading]

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ECB Economic Policy Monetary Policy

“European Central Bank has to keep all its options open”

The ECB is keeping its course and following its expansionary monetary policy stance. There had been expectations in Germany that the ECB would promise to end its purchase program in September, but these have been disappointed. The ECB has to keep its options open. The recent turmoil in financial markets, the stronger euro and disappointingly weak inflation in the euro area don’t bode well for a swift end of the purchase program. Despite the change in forward guidance, I now … [continue reading]

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ECB Europe

Comment on the latest ECB council meeting

The ECB has to strike a delicate balance between preparing markets for an exit from QE and keeping its options open to extend its QE program further, if need be. The most difficult challenge for the ECB is that it is still not sufficiently fulfilling its price stability mandate despite a stronger than expected euro area recovery. The stronger Euro, which is pushing down inflation, does not make life any easier for the central bank.

After today’s press conference, an … [continue reading]

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Currency and Financial Markets ECB

Comment on the latest ECB council meeting

The ECB is acting wisely by resisting pressure for a faster exit from QE. Continuity and reliability are two important elements of the ECB’s policy stance to avoid a taper tantrum and excessive market volatility. I am confident that the economic recovery of the euro area will allow the ECB to end its QE program in September 2018. But it is an illusion to expect a fast rise in interest rates after the end of QE. The low interest rate … [continue reading]

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Currency and Financial Markets ECB Europe

Statement on the ECB council meeting (June 8, 2017)

The ECB has now cautiously started its monetary policy reversal, even if only through words rather than deeds. The change in communication is an important step in the right direction.

Many in Germany consider the ECB’s exit as too slow. Many underestimate the importance of the ECB decision, which signals a sustained monetary policy tightening for the first time in more than ten years. The ECB is right in preparing the exit gradually and not abruptly in order not to … [continue reading]

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Business Cycles, Growth, Economic Structure Currency and Financial Markets ECB Economic Policy Europe Macroeconomics

Statement on the ECB council meeting (April 27, 2017)

It is wise for the ECB to stick to its policy strategy and not let itself be impressed by criticism from Germany. The pressure from Germany for the ECB to end its expansionary policy stance prematurely has increased. The ECB is right to resist the pressure from Germany as the economic and financial risks for the euro area are still significant.

The ECB is only gradually getting closer to meeting its price stability mandate as in particular core inflation is … [continue reading]

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Currency and Financial Markets ECB Europe

Statement on today’s meeting of the Council of the European Central Bank (ECB)

The ECB is right to orientate its policy towards price stability at the mid-term and not to react to short-term price movements. Calls for an early exit of the ECB’s expansive policy are misplaced and premature. The price dynamics of the past two months mainly reflect a normalization of energy prices. The euro area economy remains weak and unemployment rates are too high to allow for a quick return to price stability and for an end to the expansive monetary … [continue reading]

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Currency and Financial Markets ECB Monetary Policy

Statement on the meeting of the Council of the European Central Bank

ECB President Draghi has clearly signaled a continuation of its current course of monetary policy. The rising inflation trend is a positive, welcome development for everyone. Especially Germany should welcome the positive trend in inflation. The sooner the ECB can achieve its price stability objective of 2%, the sooner the ECB can end its expansionary monetary policy stance. … [continue reading]

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ECB Europe

Statement on today’s meeting of the Council of the ECB, October 20, 2016

The ECB decision bears no major surprises. Draghi did not contradict market expectations of an extension of the QE program to be announced in December. Such an extension has thus become even more likely. I do not expect a reduction in the monthly purchases by the ECB. Such a step would disappoint market expectations and could trigger undesired market reactions. The latest economic news are not encouraging and give little cause for a fundamental change in monetary policy.

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