QE | The Corner .eu

QE

World economy 24th June 2014

Halting QE= Active monetary asphyxiation?

NEW YORK | By Benjamin Cole at Historinhas | The recent historical and empirical record strongly suggests central bank quantitative easing (QE) works. The riddle is whether both the Japan and U.S. economies will slip into stagnation again without QE, as long as there is a global glut of capital holding down interest rates, and inflation is dead—or even if inflation is near 2 percent on the PCE deflator, the putative Fed target. The riddle might even be reframed: When central banks do not conduct QE, are they actively engaged in monetary asphyxiation?

Markets 27th May 2014

EU’s problem is not in Germany but in France

MADRID | The Corner | The rise of the far-right Front National will harm more the European project than any economic recipe imposed from Berlin. In the end, Germany is indeed setting hard conditions for the EU integration, but at least is favoring it, whereas France’s Marine Le Pen has a clearly anti European speech and intends to bring power back to the countries.

Markets 19th May 2014

Market chatter: Weidmann says ECB must closely watch euro

MADRID | By Jaime Santisteban | The most critical voice about the ECB’s doing something about the euro zone’s persistent low inflation, Bundesbank President Jens Weidmann, said on Monday that the ECB will watch the euro’s exchange rate closely before taking policy decisions. Also, AstraZeneca turned down the allegedly “last” bid offer from Pfizer, worth €8bn.

In Europe 15th May 2014

Draghi: when words replaced monetary policy

MADRID | By Carlos Díaz Güell | Definitely, Mario Draghi has turned communication into the essential tool for the European central bank’s policy to make sense without taking any measure at all. Month after month the ECB’s president resources to words instead of actions, but some analysts start to dislike this considering they have been long waiting for a move from the institution.

Markets 13th May 2014

Today’s market chatter: Bundesbank opening to QE and much more

MADRID | By Jaime Santisteban | After the WSJ reported that a Bundesbank source confirms the entity would support stimulus measures from the ECB in June, analysts breathed and started making their polls. How big will that support be?

Also, Madrid’s financial circles are debating on the decision of the government selling inflation-linked bonds next week for the first time. Inflation being at record low levels, the decision is not obviously opportunistic, experts commented. Spain wants to look for more public funding options, and this issuances that guarantee the purchasing power of are usually carried out by France, Germany and Italy, as well as the US.

Markets 9th May 2014

Today’s market chatter: Draghi and his playing the waiting game

MADRID | By Jaime Santisteban | ECB’s Mario Draghi’s Thursday speech is still creating buzz in Madrid’s financial circles: markets reacted very positively to the never-ending promise. Also, Bank of Spain’s chairman José María Linde alerted entities to keep strengthening their balance sheets, and explained that NPL rate slowdown will be moderate until recovery settles in.

Markets 28th April 2014

Former ECB executive: Draghi’s inaction weighing on credit lending

MADRID | By The Corner | For the first time a Spanish bank top executive has openly criticized the impact of the European Central Bank’s inaction on EZ credit lending. Spanish 2nd bank BBVA’s Jose Manuel Gonzalez-Paramo, also a former ECB board member, explained how banks are waiting to see which unconventional measures will Mr Draghi undertake, which is “fundamental for credit,” he said to Reuters on Monday. Some entities are also holding back on new credit plans and selling sovereign debt before the health checks due around October.

Markets 24th April 2014

Waiting for QE (hope it’s not like Godot)

MADRID | By Ana Fuentes | ECB policy makers are increasingly open about an eventual QE. Executive Board Member Benoît Coeuré was recently interviewed by French newspaper Le Monde. He weighed in austerity measures taken, and how could the ECB influence the level of the euro. As the central bank seems to be actually leaning towards unconventional measures, bonds and equity markets have already anticipated any announcements by Mario Draghi. But some fear what would happen if it was only lip service. What happened with the “whatever it takes” to preserve the eurozone’s integrity?

Markets 23rd April 2014

If only Citi was right and QE came…

MADRID | By The Corner | When Autumn comes, so will QE. At least that’s what economists at Citigroup are predicting. “We believe that the chances of unsterilized large-scale asset purchases (LSAPs) of public and private assets being launched this year have (…) increased to more than 50:50,” they said in a note on Tuesday. How much of a stimulus shot are we talking about? To have any effect it should be of at least 1,000 billion euros ($1,381 billion), they note, which would lift the inflation rate toward the ECB’s “below, but close to 2% target”. It could always be a decaffeinated step as some market makers are warning, but the truth is many on both sides of the Atlantic are hoping for Mr Draghi to make a move.

In Europe 23rd April 2014

BoE raises expectations (and ECB misses them)

MADRID | By Ana Fuentes | As ECB officials spend their time debating what form of QE the euro zone needs to fight deflation risk (note that although its inflation target is 2%, the central bank keeps on sitting on its hands while its balance sheet is shrinking), more data point to the positive effects of unconventional measures on growth. Check this one recently published by the Bank of England: the mere announcement of a QE shot corresponding to 1% of GDP caused a 0.36% real GDP increase and a 0.38% CPI rise in the U.S. –a little less in the U.K. Indeed, hope can move mountains… and money.

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