Europe’s monetary guardians move in the face of growing risks to the economy to increase interest rates until at least mid-2020. “We are far away from a normalisation of monetary policy, because the world is far away from normalisation,” said Mario Draghi , the President of the European Central Bank (ECB), in connection to a foreign Council meeting on Thursday in the Lithuanian capital of Vilnius.
for This condition to hold since the outbreak of the financial crisis more than ten years ago. The governing Council of the ECB generally meets at least Once a year, outside of Frankfurt.
“The ECB is ready to act in case of unfavourable conditions”, said the Central Bank chief. The ECB’s governing Council was ready to use all instruments. This includes, among other things, a tightening of the penalty interest rate for Bank deposits or resumption of the bond-buying programme to count. The Council had been discussing possible measures for an emergency, said Draghi.
Further to record low
The key rate in the Euro area remains for the time being at a record low of zero percent. The 0.4 per cent penalty interest, the need to pay banks when they Park money at the ECB, not shaken the Central Bank.
According to the assessment of the ECB’s international trade burden of conflict and the slowdown of the world economy, the economic Outlook for the Euro area. Although the Central Bank is expected this year, a somewhat stronger growth of 1.2 per cent as three months ago predicted (1.1%). For the next two years, the ECB experts expect but with a weaker growth.
inflation is expected to be, according to the Central Bank this year, at 1.3 percent, or about higher than in March predicted (1.2 percent). The ECB will not accept the current inflation rates permanent, said Draghi. In may, the consumer prices in the Euro area according to preliminary data of the statistics Agency Eurostat, up by 1.2 percent over the previous year’s level.
New money
syringe, The Central Bank is aiming for the Euro area as a whole in the medium term, an annual inflation rate of just under 2.0 per cent – far enough away from the zero mark. Permanently low or on a broad Front, falling prices lead companies and consumers, investment, to defer. That slows down the economy.
Already, new money, decided to splash for banks. From September 2019 until March 2021, the ECB provides two-year loans at particularly favourable terms – in the jargon TLTRO called. The interest rate is, in principle, closely linked to the applicable base rate. The goal is to spur lending and thus economic growth and Inflation to the region.
No relief in penalty interest
the hopes of The financial sector on discharge in respect of the penal interest were not met under the first. Because of the immense cost of the negative interest rates – according to industry figures, last year alone, around 7.5 billion euros in the Euro area – were the last to demands for graduation of the penalty rate or allowance grew louder. Leading Central bankers see this, however, was skeptical. Controversial is, among other things, how much of the negative interest rate slows down the business of the banks. Draghi said that the Central Bank will watch the development closely.
the Swiss national Bank (SNB) is likely to be of interest due to the strong dependence of the local economy from the Euro area for the decision of the ECB. You will be known in a week, whether and by what means you will react. (fal/sda)
Created: 06.06.2019, 17:47 PM