the president of the ECB, Mario Draghi, on November 21, 2016 in Strasbourg ( AFP / FREDERICK FLORIN )
“The central bank has been apparently encouraged by signals of good performance of the economy despite the political uncertainties in Europe and outside. But it is clearly stayed in the mode of caution,” said in a note to institute Capital Economics, after the decision of the ECB.
The governing council of the institution of Frankfurt has decided to continue its extensive buy-backs of debts public and private, currently set at € 80 billion per month as expected until the end of march 2017, and then to extend them to a slower pace of 60 billion euros per month until the end of December 2017.
This decrease in the amount could suggest that the ECB is engaged in the voice of the progressive reduction of its support to the economy, dubbed “tapering” in English. But the head of the institution Mario Draghi has clearly said that it was out of the question, for the time being.
He insisted on the fact that the ECB has not embarked on the path of an economic policy which is more restrictive.
Because Mr. Draghi is going to have to accompany some signs are encouraging for the european economy (quivering of the growth and inflation forecast), against the headwinds, including political uncertainties.
“The risk of deflation (which was still current in early 2016) has largely disappeared, but uncertainty reigns everywhere,” said Mr. Draghi, who has multiplied in recent years, infusions of money into the economy to stimulate growth and revive growth in Europe.
For the next year, the ECB has also raised slightly its growth forecast to 1.7% from 1.6% previously, and for inflation to 1.3% compared with 1.2% up to now.
“The economic conditions in the euro area appear to be improving,” commented the spokesperson for the IMF Gerry Rice, after the decision of the ECB. Measures which, in his eyes, “will help it achieve its objectives of price stabilization and to maintain the support of the application.”
To Olivier Garnier, chief economist group at Société Générale, “the ECB is now coming into a new phase where it is less by the quantity, and where it manages the financial conditions in function of economic developments and market rates,” he explained to AFP.
In other words, it “keeps all options on the table”, as highlighted by Holger Schmieding, of Berenberg, signalling that it could raise its buybacks again $ 80 billion “if the forecasts for inflation and growth become less favorable or if there is financial turmoil”.
“Mr. Draghi gives the flexibility to do more if the economic situation warranted it, or in the event of tensions on interest rates”, said Mr Garnier.
Because the political risks have not disappeared, as acknowledged by Mr Draghi during the press conference. After the Brexit, the victory of Donald Trump and the non-Italian people in the referendum of Sunday, the year 2017 comes with several elections crucial in Europe, especially in France and Germany.
besides the external risks, in particular if the elected president of the u.s. puts into practice its promises protectionist against chinese imports, measures that could lead to reprisals on the part of Beijing and spark a trade war.
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