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.

the sting Milestones

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

Yemen: ‘No justification for this carnage,’ says UNICEF chief, as children in need now outnumber population of Switzerland

Environmental labelling, information and management schemes are central to the circular economy

How COVID could democratise commutes

At least half of people who have a job fear they’ll lose it in the next 12 months

How COVID-19 could open the door for driverless deliveries

“None of our member states has the dimension to compete with China and the US, not even Germany!”, Head of EUREKA Pedro Nunes on another Sting Exclusive

‘Crimes against humanity,’ ‘war crimes’ and risk of new ethnic violence in DR Congo, warn UN experts

EU industry: Commission takes action to improve synergies between civil, defence and space industries

Coronavirus (COVID-19) update: Busting the myth by looking at the facts

The world is failing miserably on access to education. Here’s how to change course

Human trafficking, slavery reports and health of migrants in Libya

Urgent action needed to address growing opioid crisis

The issue of mental health for modern young doctors

Link between conflict and hunger worldwide, ‘all too persistent and deadly’, says new UN report

How Eurozone consumers spend their income when they have one…

The countries most ready for the global energy transition

How the world can ‘reset’ itself after COVID-19 – according to these experts

UN experts decry torture of Rakhine men and boys held incommunicado by Myanmar’s military

34 million Americans know someone who died after being unable to pay for medical treatment

Germany caught with selfish double standards in euro area policy

Mergers: Commission approves Synthomer’s acquisition of Omnova, subject to conditions

Easing funding woes for UN agency assisting Palestine refugees a ‘wise investment for today and the future’

‘Foreign children’ in overwhelmed Syrian camp need urgent international help, says top UN official

“As German Chancellor I want to be able to cope with the merger of the real and digital economy”, Angela Merkel from Switzerland; the Sting reports live from World Economic Forum 2015 in Davos

7 simple steps we can all take to reduce food waste

‘Being open about my mental health created a better work culture’

5 myths about face masks under the microscope

COVID-19 is likely to increase youth unemployment in Africa, this is how business can mitigate the damage

This is why retail is such a sore point in India-US trade relations

Corporate tax remains a key revenue source, despite falling rates worldwide

Trust in OECD governments back at pre-crisis levels as governments seek to be more open and engaged

Coronavirus: Commission stands ready to continue supporting EU’s agri-food sector

Mental health in times of a pandemic: what can each individual do to lessen the burden?

A brief history of vaccines and how they changed the world

Quicker freezing and confiscation of criminal assets in the EU

Madagascar: UN chief commends nation on first round of peaceful elections

How trade tariffs could help combat climate change

Mental health in a pandemic: what to do to ease the burden on people with disabilities?

Home working has exposed us all to more cybercrime. Here’s how to close the breach

How we can win the war against antibiotic resistance

Globalization 4.0 must provide for the poorest, or it risks causing chaos for everyone

JADE Spring Meeting 2015: a step forward for Youth Entrepreneurship

Coronavirus: harmonised standards for medical devices to respond to urgent needs

Giving humanitarian help to migrants should not be a crime, say MEPs

This electric plane has flown successfully for 30 minutes – is this the future of flying?

Fighting crime: faster EU-wide exchange of non-EU nationals’ criminal records

3 challenges facing global gig economy growth after COVID-19

Neither side stands to benefit in US-China trade spat, UN says

‘InvestEU’ programme: big boost for jobs, growth and investment

Prospect of lasting peace ‘fading by the day’ in Gaza and West Bank, senior UN envoy warns

Virtual Doctor: a core part of modern healthcare?

“Asia-Pacific takes stock of ambitious development targets”, written by the Heads of UNFPA and ESCAP

Dozens of children at risk as clashes in Hudaydah near hospital – UNICEF

Click and Download: your app is ready to help you save lives

It’s time to stop talking about ethics in AI and start doing it

A new tidal energy project just hit a major milestone in Scotland

“Private” sea freight indexes hide Libor like skeletons?

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

The EU Commission predicts a decimated growth in the next years

‘Stay together and step up’ action to meet Global Goals, ECOSOC President tells development forum

More Stings?

Advertising

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 )

Google photo

You are commenting using your Google 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 )

Connecting to %s