Do not panic. Two days after learning of Eurostat in Brussels that prices fell again in May in the euro area, -0.1% after -0.2% in April, the Governing Council of the European Central Bank, meeting in Vienna, Austria, decided Thursday to keep its main refinancing rate at 0%, the level at which he played since March. The rate on cash deposits to the institution’s counters remained meanwhile in negative territory at -. 0.40%
Called to speak from 14 hours 30 before the press, Mario Draghi, ECB president, should declare that inflation rates are expected slight recovery in the coming months, while remaining at still low levels because oil prices and a moderate recovery in activity. This is why the ECB intends to maintain a long time interest rates at their very low level and flood liquidity of the economy in order to eventually help return inflation to levels consistent with its mandate, or close to 2%. Stock markets await with interest of course the details of his speech.
This monetary policy Draghi has earned a critical waltz in Germany, critics have certainly calmed lately funds. In Vienna, the Italian central banker will want to demonstrate that the measures taken to date by the institution are effective in repelling deflation and support growth.
is also expected this afternoon the publication by the ECB new forecasts for growth and inflation for the years 2016 to 2018. These forecasts should join the rise and for the first time in years. They will indeed reflect the latest institution’s decisions in March, including the extension of six months of the asset purchase program and its transition to a monthly rate of 80 billion euros, until at least March 2017. the release date states that the Eurosystem will start redeeming bonds of non-financial companies from 8 June it will launch a first loan operation targeted long-term (4 years, the “TLTRO “) for banks on June 22
Greece in focus
Mario Draghi is also very waited on the Greek case while Athens and its international creditors are struggling to agree on further commitments to be taken by the country. These commitments must allow the release of a help of more than 10 billion euros. If these conditions are met, the ECB may at any time revive preferential treatment for Greek banks, deciding to reopen its counters for institutions that have him guarantees (eg government securities) to a level below that is required of ordinary. But it is also likely that the institution informed of the status of the last negotiations in Athens, decides to procrastinate. To refinance, Greek banks have been suspended for over a year to emergency financial assistance granted to them by the National Bank of Greece on less favorable terms than the ECB.
Jean-Philippe Lacour
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