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]Read more
The decision of the German constitutional court concerning the lawsuit against ECB QE program is a false compromise. The constitutional court signals that it considers the ECB QE program as a violation of European law and to constitute monetary financing. Yet the constitutional court is not willing to take a decision itself at this stage, but rather asks the European court of justice (ECJ) for “advice”.
I expect that the ECJ will again support the ECB, as it did with … [continue reading]Read more
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]Read more