Il Quantitative easing will officially start Monday March 9. This was announced today by the president of the European Central Bank, Mario Draghi, at the end of the meeting of the Eurotower Governing Council which took place this morning in Cyprus.
The governor specified that the ECB can go so far as to purchase government bonds with negative yields up to the threshold of the official rate on deposits (-0,20%).
However, Draghi called the states to their responsibilities on reforms and recovery: “There is no room for complacency. It is crucial to quickly and decisively and credibly implement structural reforms, not only to increase growth potential but also to improve incomes and encourage companies to invest", all while continuing to respect the limits established by the Stability and Growth Pact .
INTEREST RATES
The Frankfurt board had previously confirmed the monetary easing policy while maintaining the main one interest rate on the euro at an all-time low by 0,05%. The rates on marginal refinancing operations (0,30%) and on deposits that commercial banks park at the central institution (-0,20%) were also stable.
GROWTH ESTIMATIONS…
In addition, the ECB has revised upwards the forecasts on the economic growth of Euroland: from +1 to +1,5% for 2015 and from +1,5 to +1,9% on 2016. The first estimates for 2017 have also been published, which speak of a growth of 2,1%.
…AND THOSE ABOUT INFLATION
As for theinflation, the Central Bank revised its forecasts for this year downwards (from 0,7 to 0,0%), while it corrected its estimates for 2016 upwards (from +1,3 to +1,5%). For 2017, on the other hand, a +1,8% is expected, close to the official target of the ECB, which points to a price increase rate "lower but close to 2%".
THE RECOVERY SHOULD "BROADDEN AND STRENGTHEN GRADUALLY"
THEbusiness activities of the euro area marked “further improvements” at the beginning of the year – continued Draghi – and “the recovery should broaden and gradually strengthen”. According to the number one of the ECB, on the one hand the drop in oil will help the purchasing power of households and the profitability of businesses, on the other, economic activity will continue to be held back by budget adjustments, which are "necessary in various sectors".
GREECE, ECB FINANCING DOUBLE IN ONE AND A HALF MONTHS
For Greece, Draghi stressed that up to now the ECB “has lent Athens 100 billion euros” and that “in the last month and a half, ECB loans to Greece have doubled. Today their level is equal to 68% of Greece's GDP, which is the highest level in the euro area. The ECB is the first to want to restart the Greek economy, provided that the conditions exist, and these are that there is a process for an effective conclusion” of the European correction programme.
The Greek banking system "remains solvent", and it is "absolutely essential" that it continues to be so, because this is a necessary precondition for the ECB to continue to finance Greek banks with its emergency channel "Ela", added the banker central.
THE REACTION OF THE MARKETS
Immediately after Draghi's press conference, Business Square travels up by 0,75%, while Frankfurt marks +0,9%, Paris +1% and London +0,5%. On the currency front, theeuro continues to weaken against the dollar, falling to share 1,1004, new 11-year low. In sharp decline too BTP-Bund spread, at 96 basis points.
