ECB steadily continues monetary easing policy as EU economy gains momentum

Mario Draghi

European Central Bank – Press Conference Vítor Constâncio, Vice-President of the ECB, Mario Draghi President of ECB and Christine Graeff, Director General Communications (from left to right). Location: Frankfurt . Date: 09/03/2017 © ECB, 2017 / Source: ECB – Audiovisual Service

It was last Thursday when the president of the European Central Bank gave a speech on ECB’s monetary policy and EU economic recovery at the ECB and Its Watchers XVIII Conference in Frankfurt. Mario Draghi’s opinion is that the ECB’s policy is working and monetary easing should be continued as inflation rates highly depend on it.

However, the Germans couldn’t let this unanswered with Jens Weidmann, president of Bundesbank, to support for a less stimulus policy given the fact that economy is improving.

Inflation target still not reached

The ECB is continuing its monetary policy, at least till the end of the year, since inflation rate has not yet stabilized to the central bank’s target of below but close to 2%. Thus far, inflation reached a remarkable 2% on February, the highest annual rate since January 2013, but slowed down to 1.5% last month. Those figures could be encouraging for ECB if there were not plasmatic as are driven mainly by food and energy price inflation with core inflation to be at 0.9%.

More specifically, Mario Draghi stated during the conference on the issue:  “We are not yet at a stage when inflation dynamics can be self-sustaining without monetary policy support. The recovery of inflation still depends on the very favourable financing conditions that firms and households enjoy, which in turn depends on the substantial degree of monetary policy accommodation we have in place today.”

Germany responds

The stance of Germany has been always opposite to the ECB’s loose monetary policy. This time, the president of the German central bank mentioned at a banking conference in Berlin that the ECB should be implementing a less stimulus policy as it is more harmful for the EU economy. Besides, it is known that Germany does not favor negative interest rates and expansionary monetary programmes as it is the largest saver of the Eurozone.

Is the EU economy recovering?

Mario Draghi stated that the EU economy has been recovering but there are still uncertainties which can have negative consequences to the bloc. Furthermore, the ECB‘s president believes this monetary policy is one of the key factors which support the economic recovery. More in detail, Mario Draghi said last week: “We are confident that our policy is working and that the outlook for the economy is gradually improving. There are indeed three features of the recovery which give us confidence that it may be gaining its own momentum, although – given the severity of the slump we are emerging from – monetary policy still remains critical to facilitate the transition”.

The European Commission released the Winter Economic Forecast 2017 report on February. The EU economy is expected to grow at a pace of 1.8% in 2017 and in 2018. Moreover, the unemployment rate in the region is forecasted to fall from 8.5% in 2016 to 8.1% this year and to 7.8% in 2018. Even if these are the lowest unemployment figures since 2009, they remain above pre-crisis levels according to the report. In general, the Commission predicts that all EU countries will expand economically during 2016 and 2018.

EU faces great challenges

However, the EU risks from high political and economic uncertainties starting from the general elections taking place in France and Germany this year to Brexit and migration crisis. All the above are about to have a direct impact on the EU economy together with the fact that the reduction of unemployment rates is not adequately increasing wages and prices. Therefore, ECB should not only target on how to reach the desirable inflation rate but also make sure that it is not at the entire cost of the EU economic growth.

All in all, the economic figures reveal that ECB‘s intervention via stimulus monetary policy is still needed to make sure that the EU keeps on recovering. It is imperative that the EU economy becomes more resilient to economic shocks in order to ensure that future financial crises are avoided.

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

Featured Stings

Eurozone banks to separate risky activities: Can they stay afloat?

Commission’s action against imports from China questioned

Migration crisis update: The “Habsburg Empire” comes back to life while EU loses control

EU agrees on Ukraine – Georgia visa-free travel amid veto risks and populist fears

Eurozone 2013: Where to?

Facebook wins EU approval for WhatsApp acquisition; just a sign of the times

ECB again to subsidize euro area banks with more than one trillion euro

Youth Forum welcomes positive ruling on non-EU student visas

MWC 2016 LIVE: GTI shifts to phase two – 5G – after hitting milestones

EU responds to terror fallout by eroding borderless Europe and molesting the refugees

Britain and Germany change attitude towards the European Union

ECB embarks on the risky trip to Eurozone banking universe

World Summit Awards 2016: Sustainable impact through digital innovation

The West definitively cuts Russia off from the developed world

Do academia and banks favour a new Middle Ages period?

Resolving banks with depositors’ money?

On Youth Education: “Just a normal day in the life of a medical student”

Businesses succeed internationally

Let your fingers do the walking

The inhumane face of crisis mirrored in numbers

EU to spend €135.5 billion in 2014 or 6.5% less than this year

China is the first non-EU country to invest in Europe’s €315 billion Plan

The JADE Spring Conference 2017 is casting its shadows before

Why will Paris upcoming “loose” climate change agreement work better than the previous ones?

Zhua Zhou: Choosing The Future

COP21 Breaking News_03 December: UNFCCC Secretariat Launches Forest Information Hub

Why Eurozone needs a bit more inflation

The EU Commission by serving the banks offers poor support to European mainstream political parties

eGovernmnet for more efficiency, equality and democracy

“These Romans are crazy”, the “Greek Gauls” will be shouting today in Brussels hoping Caesar backs off

De Gucht: More gaffes with the talks on the EU-US free trade agreement

FIAT Chrysler: from Geneva Motor show to the World, and back

A Sting Exclusive: EU Commissioner Mimica looks at how the private sector can better deliver for international development

EU economic governance: More exploitation for the weaker countries

A Monday to watch the final act of a Greek tragedy; will there be catharsis or more fear?

Fair completion rules and the law of gravity don’t apply to banks

European Youth Capital 2018 : Cascais

The European giant tourism sector in constant growth

Is the EU competent enough to fight human smuggling in 2015?

Italy’s Letta: A European Banking Union soon or Eurozone collapses

Paris agreed with Berlin over a loose and ineffective banking union

Fostering global citizenship in medicine

Bertelsmann Stiftung @ European Business Summit 2014: Transatlantic Free Trade Agreement (TTIP) needs balanced approach

The Ecofin Council creates officially the clan of ‘undead’ banks

It’s EU vs. Google for real: the time is now, the case is open

EU crisis aggravates structural differences, threatens cohesion

The New Year 2016 will not be benevolent to Europe

Can Kiev make face to mounting economic problems and social unrest?

ECB’s unconventional monetary measures give first tangible results

TTIP 9th Round marked by American disappointment: Will some optimism save this trade agreement?

More Stings?

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s