ECB Europe Monetary Policy

Statement on the ECB decision

The ECB decision is wise and balanced. It may disappoint many in Germany. The extension of the PSPP programme was inevitable as the risks to the euro area economy are still huge and the ECB is likely to miss its price stability mandate through 2019.

The ECB decision is wise as it leaves all options open. The ECB is introducing more flexibility through the changes to the PSPP programme. The ECB decision implies a longer period of low interest rates … [continue reading]

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ECB Europe Foreign Trade and International Economic Relations Macroeconomics Monetary Policy

Statement on today’s meeting of the Council of the European Central Bank (ECB), July 21, 2016

The European Central Bank is facing a difficult dilemma. The slower the euro area economy is growing, the lower interest rates and the harder it becomes for the ECB to implement its public sector purchase program. The ECB has assumed a wait-and-see strategy in the hope that its new measures will be effective and the economy will not deteriorate further. Italy’s banking crisis, more than the Brexit, is an enormous risk for the entire euro area, also for Germany, and … [continue reading]

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ECB Economic Policy Europe Foreign Trade and International Economic Relations

Making the Eurozone more resilient: What is needed now and what can wait?

This article was first published on on June 25, 2016. 

Britain voted to leave the EU. This is terrible news for the UK, but it is also bad news for the Eurozone. Brexit opens the door to all sorts of shocks, and dangerous political snowball effects. Now is the time to shore up the Eurozone’s resiliency. The situation is not yet dire, but prompt action is needed. This VoxEU column – which is signed by a wide range of [continue reading]

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Currency and Financial Markets ECB Europe Macroeconomics Monetary Policy uncategorized

Supplement: Statement on the result of the Brexit referendum

An important aspect, that has been widely ignored in the debate about the consequences of a Brexit, is the impact on ECB monetary policy. Lower oil prices and a weaker economy in the euro zone and in Germany are likely to increase deflationary pressures further. As a consequence, the ECB is likely to extend its expansionary monetary policy path further into the future. The Brexit will most likely imply a longer period of zero interest rates for the euro area.… [continue reading]

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Currency and Financial Markets ECB Economic Policy Europe Macroeconomics Monetary Policy

Statement on the Decision of ECB’s Governing Council 06/02/2016

The ECB has signaled that low inflation is likely to persist even longer than previously feared. The new projections by the ECB have increased the probability of an extension of QE beyond March 2017. The ECB is putting great hopes into its new liquidity program for banks in order to improve credit to the private sector, strengthen the economy and thereby raise the inflation rate.… [continue reading]

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Currency and Financial Markets ECB Economic Policy Europe Macroeconomics Monetary Policy

Statement on the Decision of ECB’s Governing Council 04/21/2016

“With its decision, the ECB has signalled the continuation of its expansionary monetary policy. The ECB policy of low interest rates will not end soon. I expect interest rates to remain close to zero for another 3 to 4 years.… [continue reading]

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ECB Monetary Policy

Spotlight: Helicopter Money

In the latest Spotlight, DIW President Marcel Fratzscher explains why helicopter money offers the possibility to “circumvent” the banking system and make loans and funding directly available to households and private companies, which would help the ECB to fulfill their price stability mandate again.… [continue reading]

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Currency and Financial Markets Macroeconomics Monetary Policy

“In an International Comparison, Too Little Is Being Invested in German Industry”: Six Questions to Marcel Fratzscher

  1. Mr. Fratzscher, there are concerns about an overall lack of investment in Germany. Is the problem more urgent in the public sector or in the private sector?
    The investment gap exists in both the public and private sector. Three years ago, we calculated that Germany’s investment gap amounts to roughly 75 billion euros per year. The investment gap has also been confirmed by other studies. The problem is definitely more urgent in the private sector.
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Economic Policy Monetary Policy

ECB Projections for Growth and Inflation Very Optimistic – Downside Risks to the Euro Area Still Significant

Comment on the ECB Monetary Policy Decisions (5 March 2015):

The new ECB projections for growth and the return to price stability are very optimistic. The ECB projections are based on probably too optimistic expectations about the effectiveness of its QE programme. The weak euro and the decline in government bond yields over the past few months are largely the result of the high expectations about the QE programme. It is unlikely that the QE programme will continue to exert … [continue reading]

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