Thursday, July 3, 2014

ECB to publish details of meetings from Jan. 2015

    The European Central Bank (ECB) will follow other major central banks and start to publish details of its monetary policy meetings starting from January 2015.
    Unlike other central banks, the ECB has been reluctant to release minutes of discussions held by its ruling governing council due to concern that it would inhibit a free debate.
    The ECB's council comprises governors of the 18 national central banks in the euro area along with the six members of its executive board.
    ECB President Mario Draghi also said in his remarks to a press conference that the council would no longer meet to discuss monetary policy once a month but every six weeks, starting in January.
    Draghi reiterated the ECB's policy guidance that "interest rates will remain at present levels for an extended period of time in view of the current outlook for inflation."
    Last month the ECB cut its benchmark refinancing rate by 10 basis points to 0.15 percent and the deposit rate to minus 0.10 percent to ward off the threat of inflation remaining too low for a prolonged period.
    "Moreover, the Governing Council is unanimous in its commitment to also using unconventional instruments within its mandate, should it become necessary to further address risks of too prolonged period of low inflation," Draghi said, confirming the ECB's readiness to embark on some form of asset purchases - known as quantitative easing - if necessary.

    In addition to rate cuts last month, the ECB launched a package of measures to boost economic activity and inflation, including up to 400 billion euros of cheap loans aimed at households and businesses, refinancing operations as fixed tenders with full allotment at least until end of December 2016 and the suspension of sterilization of liquidity injected from May 2010 to September 2012.
    Draghi and other ECB policy makers have said giving banks in the euro area access to unlimited liquidity up to the end of 2016 was a signal of the ECB's intention to maintain low rates for that time.
    Although the euro area has recovered from recession in 2012 and 2013, the recovery remains sluggish and inflation far below the ECB's target of inflation below, but close to 2.0 percent.
    In the first quarter of this year, euro area Gross Domestic Product expanded by 0.2 percent from the previous quarter for annual growth of 0.9 percent, up from 0.5 percent in the fourth quarter, the first quarter of expansion after seven consecutive quarters of contraction.
    "Economic indicators, including survey results available up to June, signal a continuation of the very gradual recovery in the second quarter of 2014," Draghi said, adding that domestic demand should be supported by the ECB's rate cuts while exports should benefit from the global recovery.
    But lending to the private sector remains weak and the continued reduction of debt levels by the public and private sector continues to dampen the economic recovery.
    Illustrating the weak activity by non-financial businesses in the euro area, Draghi said the annual rate of lending was minus 2.5 percent in May compared with minus 2.8 percent in April while the annual growth rate of loans to households was just 0.5 percent, largely unchanged this year.
    Inflation in the euro are was unchanged at 0.5 percent in May from April, with a rise in services prices countered by lower food prices.
    "The Governing Council sees both upside and downside risks to the outlook for price developments as limited and broadly balanced over the medium term," Draghi said.
    Last month the ECB staff revised downwards its forecast for average 2014 inflation to 0.7 percent from its March forecast of 1.0 percent, its 2015 forecast to 1.1 percent from 1.3 percent and its 2016 forecast to 1.4 percent from 1.5 percent.
    ECB staff also revised downwards its projection for GDP to expand by 1.0 percent this year, down from its March forecast of 1.2 percent, but revised upwards its 2015 forecast to 1.7 percent from 1.5 percent and maintained the 2016 forecast of 1.8 percent growth.
    "The risks surrounding the economic outlook for the euro area remain on the downside," Draghi said, noting in particular geopolitical risks, developments in emerging market economies and global financial markets.


Post a Comment