41908
ECB Stimulus Working, But Inflation Continues
World Economy

ECB Stimulus Working, But Inflation Continues

Mario Draghi is discovering that the European Central Bank’s purchasing power isn’t as strong as he had hoped.
Less than two years since the ECB president said he would boost the institution’s balance sheet to €3 trillion ($3.4 trillion) to revive inflation, he has reached that way-point and is on the verge of setting a new record. Unfortunately, inflation has only worsened, Bloomberg reported.
The disappointing outcome so far—partly the result of an unforeseen plunge in oil prices and a China-led slowdown in the global economy—suggests the central bank’s asset base will rise further before consumer-price growth is back in the comfort zone. It’s also a cautionary tale against setting out policy milestones in an era where monetary instruments are struggling to succeed. A spokesman for the ECB declined to comment.
“The effectiveness of the tools, certainly the signaling capacity of the ECB, isn’t what they anticipated it would be,” said Karen Ward, an economist at HSBC Holdings Plc in London. “It would have been worse if they hadn’t done it, and the external environment has blunted the effectiveness. But we’re increasingly seeing that many of the problems in Europe can’t be fixed with monetary policy.”
2014 Press Briefing!
Draghi’s pledge dates back to September 2014, at a press conference in Frankfurt after the Governing Council cut interest rates and decided to start a private-sector bond-buying program, adding to a previously announced bank-lending plan. While the opening statement, which is agreed by the council, referred only to the measures having a “sizable” impact on the balance sheet, the president went further when asked what that meant.
The ECB aimed to “significantly steer the size of our balance sheet toward the dimensions it used to have at the beginning of 2012,” he said. He repeated the line in testimony to the European Parliament in November 2014, and it was in the opening statement for his December policy press conference.
The wording signaled assets would rise to more than €3 trillion from €2 trillion at the time. They reached €3.03 trillion as of May 13 this year and look set to pass the June 2012 high of €3.1 trillion within weeks.
Yet the inflation rate, already a worryingly weak 0.3% in September 2014, slid as low as minus 0.6% by the following January and was minus 0.2% last month. The ECB’s goal is to keep consumer-price growth just under 2% and its own forecasts show the undershoot will continue for at least another two years.

Short URL : http://goo.gl/EBsuhG
  1. http://goo.gl/WKjmAk
  • http://goo.gl/7fVFM0
  • http://goo.gl/aoRJTR
  • http://goo.gl/0NAf6U
  • http://goo.gl/xPGgWq

You can also read ...

Close to 40% of digital transformation initiatives will be supported by AI capabilities.
The digital economy in Asia-Pacific, or APAC, is expected to...
An electronic stock indicator of a securities firm in Tokyo.
As investors come to terms with the impending end of easy...
Most economists would agree that Italy needs faster economic growth if it is to resolve its public debt  and banking-sector problems in an orderly manner.
Italy’s economy is growing again, but it’s still the worst...
Maersk is expanding its competitive universe to include different types of companies.
The world’s largest container company will start looking for...
Lloyds Profits Miss Forecasts
Lloyds Banking Group PLC raised its 2017 dividend by 20% and...
NZ Says Pacific Trade Deal Will Boost GDP
New Zealand estimates a Pacific trade deal would boost its...
CBs May Top Inflation Targets
Not only will central banks meet their inflation targets, they...
Pak Current Account Gap Widens
Pakistan’s current account deficit widened 28.74% on a month-...

Trending

Googleplus