Europe's economy is surprising people with its strength but don't look for the European Central Bank to signal a withdrawal from its stimulus efforts at Thursday's meeting.
ECB President Mario Draghi has been cautious in
recent days, stressing that the economy still needs support, especially
when it comes to inflation, which is still below what the bank considers
ideal.
Here's a quick guide on what to expect from the
meeting of the bank's 25-member governing council and following news
conference. It's being held in Tallinn, Estonia, one of the occasional
meetings held away from the bank's Frankfurt headquarters.
___
GROWTH IS STRONG
Draghi has been going out of his way to describe
the current economic upturn as a result, to a great extent, of the
bank's policies. In particular, he points to the 5 million new jobs that
have been created as the 19 countries that use the euro bounce back
from troubles over high government and bank debt in several member
countries.
The economy expanded 0.5 percent in the first quarter and the ECB forecasts 1.8 percent growth this year.
But that brighter view of the future also
assumes the stimulus continues. "A very substantial degree of monetary
accommodation is still needed," Draghi said at his last news conference,
on April 27.
___
NO STIMULUS WITHDRAWAL — YET
The emphasis the ECB puts on its role implies
that it believes growth isn't yet strong enough for it to start dialing
back on the bond-buying stimulus program it has been running since March
2015.
Each month, the bank has been purchasing 60
billion euros ($68 billion) in government and corporate bonds from
banks. It pays for the purchases with newly created money.
The purchases push that new money into the
economy, a step that can increase inflation. And they drive down
longer-term interest rates, making it cheaper for governments and
businesses to borrow and spend. The central bank has also set its
short-term interest rate benchmark at a record low of zero.
Analysts expect the ECB to sketch out a roadmap
for tapering the bond purchases stimulus at its September 7 meeting.
They expect it to start tapering the size of the monthly purchases in
early 2018 until they are ended in mid-year or later. Only after that
would interest rate benchmarks go up.
___
INFLATION
A key aspect of Thursday's meeting will be
whether the central bank forecasts a sustained upturn in inflation,
especially the core inflation figure, which does not count volatile
items like the price of oil and has been stuck at a weak 0.8-0.9 percent
for a year.
Recent pronouncements indicate the central bank
does see inflation picking up yet. The written account of the bank's
deliberations at its April 27 meeting indicated it felt inflation
pressures remained "subdued and had yet to show a convincing upward
trend."
___
KEY PHRASES
Look for tweaks in the bank's written statement.
Analysts expect it to say that risks to the recovery are "balanced,"
instead of skewed to the downside. A provision that interest rates could
go even lower might be dropped.
A bigger step would be dropping the bank's
promise that it could add even more bond purchases if needed. That
promise might be dropped in July as a final prelude to the stimulus exit
announcement in September.
___
SIGNIFICANCE
Tapering the bond purchases will have
wide-ranging effects. Those would likely include higher interest costs
for longer-term borrowers, such as governments and people buying houses
with mortgages. Returns on savings accounts and other low-risk holdings
should rise from current paltry levels, increasing their attractiveness
relative to stocks. Weak companies that can't pay normal borrowing costs
might go out of business — a development that economists think would
reallocate capital to more productive uses.Fonte: USNews
Curta nossa página no Facebook!
0 comentários
Agradecemos seu comentário! Volte sempre :)