Tapering will come anyway, largely because of technical/ political constraints around QE. The ECB will still have to justify this with a macroeconomic narrative. This is what the ECB President has set out to do.However, experts at BoAML believe that what he said yesterday in Sintra central bankers summit is also consistent with a very slow exit.
The deadlines for the merger of Bankia and BMN will be accelerated once it has been confirmed there is no interest on the part of other investors. The tie-up is expected to be completed after the summer and will be the starting gun for the next round of sector consolidation.
The problem loans of the big banks directly under ECB supervision totalled close to 1 trillion euros at end-2015, although they declined to 921 billion in September 2016 (almost 9% of the euro area’s GDP), according to the data disclosed by Vítor Constâncio on February 3. But the problem is that this figure is not distributed homogeneously across the banks.
BoAML | The ECB has closed many doors in December. The 2015-16 strategy of monetary policy covering for fiscal loosening to facilitate structural reform has changed.We are back to national governments having to navigate through strained fiscal trajectories, leaving very little room for mistakes. Potential growth prospects are not great, not only in the periphery.
Governments do not want to acknowledge that a Central Bank does not have the ability to bolster the economy. Monetarism has not worked. The massive purchase of corporate bonds by the Central Banks has not worked. They have been left alone to face the problem and they have failed. The solution is to activate demand and Central Banks cannot do this.
J. L. Martínez Campuzano (Spanish Banking Association) | The BoJ has begun a period of reflection to try to answer the question of why expansionary monetary measures are not being reflected in higher inflation. I honestly believe that this is a reflection which other central banks should undertake. But, in the end, the easiest thing will always be to continue with more measures without a clear strategy of what their final objectives are.
Miguel Navascués | Take a look at the outstanding balances in the ECB’s TARGET2 payments system, which maintains an up-to-date record of the debts and loans each country has with the other. As can be seen from the table below and the subsequent graphics, Italy, where the banks have 360 billion euros of doubtful loans, as well as Spain, have again begun to show signs of weakness.
Julius Baer Research | We share the view of Mario Draghi, President of the European Central Bank, that his ultra-accommodative monetary policy stance alone cannot push the eurozone economy out of its current weakness but needs to be complemented with fiscal impulses.
The European Central Bank kept its interest rates and policy plans unchanged on Thursday and said the immediate stress caused to markets by Britain’s shock vote to leave the European Union had been contained.
BoAML | We have remained quite bearish on Euro area inflation for the past few years, particularly compared with ECB forecasts (but also consensus), and have highlighted the many downside risks to the inflation outlook.