Thursday, January 19, 2017

Draghi: the Germans must have “patience,” stimuli are to become – Jornal de Negócios – Portugal

The European Central Bank (ECB) will maintain the program of purchase of assets at least until the end of the year, the interest rates will be at current levels or lower well beyond that date, and if the signs of the economy getting worse the central bank is ready to strengthen the stimuli that have in the field. This was the message from Mario Draghi in the first press conference of the year in Frankfurt, in which devalued the recent increase of inflation in the Euro Zone as not being sustainable, and asked for patience to the opinion of the German public. With time, the interest will rise, but that time has not yet arrived, and defended.

The president of the ECB dismissed the recent rise of inflation in the Euro Zone, which it says reflect “primarily the strong rise in inflation of energy, while there are signs of a growing trend convincing on the underlying inflation”. Draghi added that he hopes that the overall inflation continue to rise in the coming months, warning at the same time that this movement also will not be enough to lead to a change of policy, in Frankfurt. “Measures of underlying inflation [which excludes energy and food commodities] are expected to grow more gradually in the medium term”, he warned.

In reaction to the press conference, the euro fell, the main european stock exchanges have risen, and interest rates almost did not react.

Several times confronted with suggestions of the past weeks in the direction of the ECB to start planning a reduction in stimulus given the recovery of inflation – which in December rose to 1.1% in the average of the Euro Area, and to 1.7% in Germany – Draghi answered at two levels, a read more politics; the other with implications of more techniques.

on the one hand, addressed to the public opinion in German, explaining that they must have patience and wait for a recovery stronger in the Euro Zone: “The low interest rates are now necessary to ensure that the higher interest rates in the future. The recovery in Europe is positive for all, also for Germany,” he said, adding: “it Is important to have patience. To the extent that recovery is to say, the interest rates will also go up. This will happen to Germany and to all other countries.”

on the other hand, the president of the ECB explained the four characteristics that must be met for the ECB to identify a sustained recovery of the inflation that motivates a change of the monetary policy: in the first place, what matters for the central bank is the prospect of inflation in the medium term; in the second place, the trajectory has to translate a convergence lasting and not transient to the target of 2%; in the third place, the recovery has to be self-sustaining – that is, you must keep even when our monetary support extraordinary not already on the ground”; and, finally, inflation must be set for the Euro Area as a whole.

With the answer Draghi sought to ease the pressure of the last few weeks, the arrival for example of economists and German politicians, including Finance minister Wolfgang Schäuble, who have argued that the central bank should begin planning a withdrawal of stimulus, ideally already this year, because for the savers with the worst economic environment possible is an economy with high inflation and low interest rates.

On the contrary, several experts have been emphasizing that the pace of rising inflation in the Euro Zone is due essentially to the effects of the prices of fuels and food commodities (underlying inflation rose from 0.8% to 0.9%), and that all the measures are far from the 2% target of the ECB. To the arguments for an expansionary monetary policy, combined with the uncertainty of the impacts in Europe of the “Brexit” and the policies of the new administration to Trump.

The president of the ECB was in fact several times asked about what impacts expected to want to process the output of the United Kingdom of the EU, or of the new policies in the U.S., but both replied always that it is “too early” to comment.

THE ECB thus provides that “the interest rate on the main refinancing operations and the interest rates of the standing lending facility liquidity-and the standing deposit facility will remain at 0% to 0.25% and-0.4% respectively,” reads the note sent to the press where it reaffirms that there will be (or even in the lower levels) “for a long period of time, and well beyond the horizon of purchases,” which in December was extended until the end of this year.


About the non-standard measures, that is, the program of buying assets at a pace of 80 billion euros a month until April, and 60 billion euros a month from then until the end of the year, the GOVERNING Council ensures that it is to fulfill until the end, reaffirming again that can even be extended up to the Council to “see a sustained recovery of inflation consistent with the inflation target”.

The Business has been live on Facebook to analyze the reuinão of the ECB. See the video:

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