Quantitative easing until September, beyond if necessary, Mario Draghi had already hinted. And no rate hikes, at the moment Today's ECB bulletin confirms this orientation, which could also open the door to an extension of the bond purchase program until 2019: "Based on the results of the economic analysis and the signals from from the monetary analysis, the Governing Council confirmed the requires a high degree of monetary accommodation to ensure a lasting return of inflation rates to levels below but close to 2 per cent over the medium term”.
This is what we read in the economic bulletin released this morning by the ECB in which it underlines how the "continuation of monetary support comes from net asset purchases, from the significant amounts of assets purchased and from current and future reinvestments, as well as from forward-looking on interest rates". On the basis of these considerations, the bulletin continues, “the Governing Council has decided to leave the ECB's key interest rates unchanged and continues to expect them to remain at current levels for an extended period of time, and well beyond the horizon of the net asset purchases.
“In the euro area, growth continues solid and across the board, although the new data has been overall lower than expected in the first quarter of the year”, continues the ECB, which recalls in its monthly document how in the last quarter of 2017 the GDP in real terms increased by 0,7% in quarterly terms, after having recorded a similar growth in the previous two quarters. In the fourth quarter, domestic demand and net trade contributed positively to the dynamics of the product, while the change in inventories slowed its growth slightly. “Although still maintaining very high levels – reads the bulletin – economic indicators, especially survey results, have weakened recently. This indicates that in the first quarter of the year the expansive dynamic would have weakened”.
“This decrease – it goes on to read – could in part reflect a deceleration compared to the high rates observed at the end of last year, but, at the same time, also the effect of temporary factors. Overall, however, growth is expected to remain solid and across the board. Private consumption is supported by the continuing increase in employment – in turn partly attributable to past reforms of the labor market – and by the growing wealth of households. Business investment continues to strengthen as a result of very favorable financing conditions, the increase in business profitability and the strength of demand. Housing investment continues to improve. In addition, the broad-based global expansion is providing impetus to euro area exports”.
“A significant escalation of trade tensions could derail the ongoing recovery in global trade and activity performance,” continues the European Central Bank bulletin, with reference to trade tariffs. “The simulations made by the ECB staff – reads the report – indicate that in the event of a significant increase in protectionism, the impact on global trade and output would be significant. In a scenario where the United States dramatically raises tariffs on import goods from all partner countries and where they take symmetrical retaliatory measures, the outcome for the global economy would clearly be negative. Global trade and activity would fall relative to the baseline scenario. In such a scenario, the impact would be particularly significant for the United States”.
