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.
Once again Mario Draghi followed the expected script: it kept interest rates at 0%, where they have been for the last year; it left the deposit facility unchanged at -0.4% and did not modify the debt purchasing programme.
Eurozone inflation increased above the European Central Bank’s target for the first time in four years, Eurostat’s figures showed on Thursday. Inflation accelerated to 2 % in February from 1.8 % in January. A similar higher rate was last seen in January 2013. Markets expected prices to rise 1.9 %.
It was expected Draghi to avoid any discussion of early exit from QE and he did so. The ECB’s president stuck to the December line. “Self sustained”, not “transient” inflation is wanted. Still, things may complicate this spring.
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.
Francesco Saraceno | Is the last BoJ move a serious risk to blow credibility. If it failed to lift the inflation to the 2% target, how can it be credibly believed to overshoot it? Credibility was associated in the past three decades to changing incentives over time, and invoked to recommend rules over discretion. Today, eight years into the zero lower bound, we go back to a more intuitive definition of credibility: announcing an objective and not being able to attain it.
J. L. Martínez Campuzano (Spanish Banking Association) | Little by little it’s being acknowledged. Just this Thursday, the President of the ECB openly admitted that monetary policy has its limits in terms of driving growth and stimulating inflation. And in fact, history tells us that monetary policy is more efficient for fighting inflation than for creating it.