James Alexander via Historinhas | You have to feel for ECB President Draghi sometimes. He’s trying to steer a huge and dysfunctional ship. His heart is in the right place, but he has far too much faith in the interest rate and credit channel “instruments” for the management of monetary policy. They have prevented further recessions and do seem to have the Euro area on the right track, but it is painfully slow and risky .
The market has already discounted that the ECB will announce new stimulus measures on December 3rd, modifying the current debt purchasing programme. But monetary policy only goes so far, and apart from the central bank’s measures, the Eurozone needs more public and private investment to recover its growth potential.
Barclays | Both ECB’s Vice President Constancio and Chief Economist Praet warned of a potential macroeconomic impact of Paris terrorist attacks last Friday although the noted that these types of events generally have a transitory effect on the economy.
BARCLAYS | The minority conservative government led by Prime Minister Pedro Passos Coelho was ousted present week after the parliament rejected his government’s programme by a vote of 123 to 107. Political uncertainty is likely to continue to weigh on Portugal’s funding costs, despite the very accommodative monetary policy of the ECB.
Markets are trying to glean any hint about whether or not the ECB will confirm additional stimulus during its monthly meeting today. Most analysts forecast a QE reinforcement in quantity, as well as in term, before year-end or in 2016. But there is also a minority who bet on the central bank just adding corporate debt to the cocktail.
PARIS | Francesco Saraceno | What I’d like to express here is my jealousy for the discussions (and the confrontation) that we observe in the US about rate rises. These discussions are a sideproduct, a very positive one if you ask me, of the institutional design of the Fed.
Fernando Barciela | The central bank has put QE in place, a trillion euros asset purchase programme, but inflation has returned to negative territory. Has the ECB’s strategy failed? Are critics right when they say it does too little, too late.
Estimations for the Eurozone’s inflation in September have been met: prices turned negative again after six months above zero. Some analysts think this time “the ball in not in the ECB’s court”.
Even if money supply growth in the eurozone slowed by 0.5% to 4.8% in August, credit to households increased by 1% to 1.4%. In particular, mortgage loans rose 1.6% compared to July.
While Yellen bet on increasing rates, China’s slowdown concerns Draghi, but he is not considering further stimulus for the time being, says Gabriel Marqués at Intermoney.