Go to ...

Economics Gazette

Economy and Business news

RSS Feed

June 24, 2019

The ECB shows shows greater optimism about the Eurozone economy

ECB economyThe European Central Bank (ECB) shows greater optimism about the Eurozone economy, but do not signs for the end of the quantitative easing program. On the background of the emerging transatlantic trade war and the rise of populism in the Italian parliament after the latest elections, the ECB president Mario Draghi is unlikely to shake the boat with the topic of higher interest rates or shortening the government bond purchase program.

The observers believe that the ECB is on its way out of its stimulus program after deciding to halve the purchase of state and corporate debt to 30 billion EUR per month since January.

Along with historically low interest rates, the bond purchases aim to support economic growth in the Eurozone by pouring cash into the financial system, thus raising inflation to target 2%, which is perceived as favorable for long-term growth.

The ECB is likely to have a greater divide in internal discussions when the bank’s board meets today. The key issue is the ECB’s policy guidance on the markets for what will happen after the current 30 billion EUR monthly asset purchase program expires in September.

Although gross domestic product in the Eurozone rose 2.5% last year, the prices did not rise at the same rate.

In December, the ECB predicts inflation to rise to 1.7% by 2020, which is again below the target.

The indicators such as business confidence, unemployment and credit growth, correspond to the ECB’s positive estimate of future growth of 2.3% this year and 1.9% next year. The minutes of the January ECB meeting indicate that the institution’s representatives, who are quicker to close the bond purchase program, are becoming “louder”.

Leave a Reply

Your email address will not be published. Required fields are marked *