(Reuters) - The
European Central Bank will launch into quantitative easing next week having
increased its economic growth forecasts for this year and next.
The ECB, which left
interest rates on hold at record lows just above zero at its meeting off-base
in Cyprus on Thursday, lifted its growth forecast to 1.5 percent for this year,
from the 1.0 percent it predicted in December.
For 2016, growth of
1.9 percent is now expected, up from a previous 1.5 percent. "The latest
economic data, and particularly survey evidence available up to February, point
to some further improvements in economic activity at the beginning of this
year," Draghi told a news conference.
"Looking ahead,
we expect the economic recovery to broaden and strengthen gradually." An
analysis of Reuters polls shows more than half the most important economic data
reports from the euro zone since the start of the year have beaten the
consensus forecast and many have topped the highest prediction.
Germany, Europe's
largest economy, has led the way. Inflation, now running at -0.3 percent, is
forecast at zero this year rising to 1.8 percent in 2017. That is sufficiently
close to the ECB's target to suggest money printing will not run beyond Sept.
2016.
The bank has a long way
to go to convince markets its plans will be effective. Only half of the
economists polled by Reuters think bond buying will help inflation rise toward
the target of close to but below two percent and half think the purchases will
be extended.
There are tentative
signs inflation has bottomed out. The February reading of -0.3 percent was
above forecasts, oil prices have rebounded from January lows, growth is picking
up and the euro hit a fresh 11-year low against the dollar overnight, boosting
prospects for higher imported inflation.
"The risks
surrounding the economic outlook for the euro area remain on the downside but
have diminished following recent monetary policy decisions and the fall in oil
prices," Draghi said.
GREEK HELP
The ECB is keen to
stay out of the political debate over Greece's future and Draghi signaled the
ECB would not allow a plea from Athens to be allowed to issue more short-term
debt to get it over acute short-term funding problems.
But he said the ECB
had raised the amount of Emergency Lending Assistance (ELA) that the Greek
central bank could provide to its banks.
Anticipation of the QE
program has driven euro zone borrowing costs down to the point where Spain can
borrow for 10 years at under 1.3 percent and investors actually pay for the
privilege of lending to Germany for five years. Yields in Italy, Spain and
Portugal dropped to record lows this week.
Some analysts have
suggested the ECB would distort the bond market by buying bonds with negative
yields. Draghi said it would only steer clear of bonds yielding less than the
ECB's -0.2 percent deposit rate.
Another concern is
whether the ECB will find enough bonds to buy as the market is flush with
uninvested cash while banks are under obligation to hold top tier assets, like
government debt.
"There may be
complexities. We think they are not relevant," Draghi said, noting that
more than half euro zone sovereign bonds were held outside the currency area.
Draghi said the ball
was now in the court of euro zone governments who must contribute
"decisively" to economic recovery with structural economic reforms.
"Decisive
implementation of product and labor market reforms and actions to improve the
business environment for firms need to gain momentum in several
countries," he said. "It is crucial that structural reforms be
implemented swiftly, credibly and effectively."
Δεν υπάρχουν σχόλια:
Δημοσίευση σχολίου