New signals are arriving from Frankfurt in favor of a strengthening of quantitative easing within the year. The European Central Bank sees downside risks to the economic recovery and to inflation, and, in the economic bulletin published today, underlines that "the degree of monetary accommodation will be reviewed in December, when the new macroeconomic projections of the experts of the Eurosystem. The Governing Council reaffirmed its willingness and ability to act using all available tools”. The current securities purchase plan "is endowed with sufficient flexibility to be able to adjust its size, composition and duration", recalls the central bank.
“The risks for the area's growth prospects remain oriented towards the downside – continues the bulletin -, reflecting in particular greater uncertainty regarding the evolution of emerging economies, potentially capable of exerting further effects on world growth and on the external demand for euro area exports. The greater uncertainty that has recently emerged in the performance of the financial markets could also have negative repercussions on the internal demand of the area”.
Similarly “there are risks that could further slow down the gradual recovery of inflation towards levels closer to 2 per cent”. Based on current crude oil futures prices, annual HICP inflation “is expected to remain negative or low until November 2015, before increasing until the end of the year, mainly due to base effects. related to the drop in oil prices at the end of 2014".
WARNING ON THE "INAPROPER" USE OF FLEXIBILITY
The European Central Bank also issued a warning on the "inappropriate" use of the flexibility provided for by the European rules in the event of structural reforms: "Given that only a few types of reforms could actually involve short-term budgetary costs - reads the bulletin -, the flexibility granted by the Stability and Growth Pact must be applied with caution to avoid the risk of inappropriate use”.
WITH THE NON-CONVENTIONAL MEASURES, THE RATE ON 10-YEAR BTP HAS DROPPED BY 100 BASIS POINTS
The ECB also underlines that the government bonds of Italy and Spain are those that have benefited most from the "unconventional measures implemented since June 2014", thanks to which yields have been "considerably reduced in a wide range of segments of the financial markets . In general, the effects intensify as maturity and riskiness increase. For example, a significant impact is estimated for long-term sovereign bonds, with a decline in ten-year bond yields of around 70 basis points for the euro area and around 100 basis points for Italy and Spain”.
WORK: THE EUROZONE IS IMPROVING
As for the situation of the labor market in the euro area, “it continues to improve gradually – continues the ECB -. The most recent data obtained from the results of the sample surveys would show a further gradual improvement of the labor market in the near future”. In the second quarter of this year, recall the Eurotower experts, employment rose by a further 0,3% in quarterly terms, recording the strongest annual increase since the second quarter of 2008. As a result, employment was 0,9% higher than the previous year. The unemployment rate for the euro area, which had started to decline since mid-2013, continued its decline in the second quarter of 2015, to substantially stabilize at around 11% in July and August .
