J.L.M. Campuzano | On Thursday, the ECB confirmed what many analysts were expecting: the limit on expansive monetary measures has now probably been reached, without this meaning there will be an immediate reversal. And the reason for this? Simply that the risks are more balanced now.
ECB monetary policy
J. L. M. Campuzano (Spanish Banking Association) | Stable inflation centred around levels of 2.0%…A scenario dominated by rising inflation is as complicated as one where deflation and potential low economic growth can create a vicious circle difficult to exit. Especially in a context of high indebtedness.
Lately there is growing criticism of the ECB over its supposed “democratic deficit”. It is being accused of oversteppping the mark by being obliged to take “political decisions”.
I believe central banks don’t control long-term rates – which are decisive for investment – and that they can influence them in what we would call normal circumstances, namely when GDP is expanding and inflation is at its optimum level. The central bank trys to control the private market’s expectations, but it doesn’t always succeed.
J.L Campuzano (Spanish Banking Association) | What is clear from ECB President Mario Draghi’s speech last Thursday is that investors consider we are closer than farther away from the start of monetary normalisation against a backdrop of economic optimism.
The European Central Bank kept monetary policy unchanged: interest rates on hold and made only its previous broad commitment to run bond-buying for as long…
Money in circulation (M2 in the US, M3 in the Eurozone) is not created by the central bank, but by the private banks when they lend. These loans are the fundamental countepart of M2 and M3. Loans are converted into deposits which provide the liquidity for us to function.
J. L. M.Campuzano (Spanish Banking Association) | During one of the conferences at last week’s Jackson Hole meeting, ECB council member Benoit Coeure analysed the extreme monetary measures taken by the ECB (in reality by all the main central banks) during the crisis. His opinion was that the neutral interest rate equilibrium is now very low (the product of a combination of low potential growth and low inflation expectations) which explains the remainder of the exceptional measures implemented.
By James Alexander via Historinhas | Another day another proof of the immediate impact of active monetary policy in altering NGDP growth expectations and therefore setting the flight path to a different future.
Some experts analyse the impact of the first almost 6 months since the ECB announced the launch of its ‘quantitative easing’.