The latest communications from the ECB "clearly signal that we will be patient in determining the timing of the first rate hike and that we will follow a gradual approach to monetary policy adjustment thereafter". The president of the ECB, Mario Draghi, said on Tuesday at the forum of central banks in Sintra, Portugal. And the European stock exchanges appreciate by reducing the losses accumulated at the start of the morning.
In particular, as announced last week, the Qe will end on 31 December 2018, but if unforeseen events should emerge it can always be reused, while interest rates will remain at current levels at least until the summer of 2019 "and in any case for as long as necessary to ensure that the evolution of inflation remains in line with our current expectations for an extended period”, remarked Draghi. “Monetary policy in the euro area will remain patient, persistent and prudent, the changes will be predictable and will continue at a gradual pace, the most appropriate to consolidate the convergence of inflation, taking into account the continued uncertainty in the economy”.
Uncertainty that "permeates the economic prospects" and that in recent months "has increased", underlined the number one of the Eurotower, specifying that the main risks are three: market volatility, the increase in trade protectionism due to the new tariffs imposed by the USA and the increase in oil prices linked to geopolitical tensions in the Middle East. "We will continue to monitor these risks carefully - continued Draghi - but for now our medium-term growth expectations remain substantially unchanged and the balance of risks appears balanced".
However Draghi throws a reassuring explanation when he explains that the decision taken last week in Riga by the Governing Council of the ECB “while acknowledging the increase in uncertainty, shows that we are confident that the expected convergence in the inflation path will likely occur without the need for further additions to our stimulus".
In addition to the ECB president, the OECD also intervened on Tuesday, issuing a warning on public debts: "In the past, in some cases when the economy was going well, the favorable situation was not used to sufficiently improve the position of budget and the crisis has led to a significant increase in debt/GDP – reads the report published today on the Eurozone – in 2019 the stance of fiscal policy in the area is appropriate but given that the economy is expanding, countries with high debt must ensure that the debt-to-GDP ratio is significantly reduced by further improving the fiscal position”.
Furthermore, according to the OECD, "to further weaken the potentially harmful link between banks and sovereign debt, it is necessary to introduce capital loads that increase in line with the degree of concentration of sovereign debt in banks' portfolios and other policies could incentivize banks to diversify the securities held: a combination of policies, including a gradual introduction of higher capital requirements on excessively large country debt holdings and the introduction of a European Safe Asset is necessary and should be considered in parallel".
The Organization then writes that “risk sharing in a monetary union is important. A monetary policy can only react to euro-area-wide shocks and can be limited by interest rates to a minimum, so that other tools must exist to deal with more or less large-scale asymmetric shocks: in the euro area, a incomplete banking and fragmented capital markets prevent higher levels of private risk sharing across a wider range of savings and investment opportunities. Non-performing loans are still very high in some countries, undermining credit and investment growth. In Italy the level of NPLs is now higher than in Ireland”, even if they are decreasing.
