With a few hours intervals on Friday held two of the world’s most powerful central banks, the Fed’s Janet Yellen and the ECB, Mario Draghi, his speech at the economic conference in Jackson Hole, Wyoming.
Their conditions authorities differ widely. When the United States economy is now slowly starting to get up to speed, it’s mostly about when Janet Yellen and the Fed decides that the policy rate should be raised and the economy slowed. The Eurozone, however suffer from both low inflation, tenacious growth in many areas and a stubbornly high unemployment rate, which characterized the Draghi speech.
The risk that European The Central Bank, ECB, running just is not that do too much, without doing too little, pointed Draghi. If the ECB’s actions are too mild, you risk an unemployment rate that is normally cyclical made permanent, said ECB president on Friday, a few hours after the Fed chief Janet Yellens speech.
Although no new details about the ECB ‘s subsequent actions were not so Draghi’s speech could be interpreted weakly positive by supporters of a more aggressive policy from the central bank when it comes to stimulating the EU’s tough economy.
ECB boss’s speech should be seen against the “package” of measures Draghi announced in June. Then sprinkled key interest rate to 0.15 percent and the ECB took the unusual trick of introducing negative deposit rate for Europe’s banks, which now have to pay to deposit money with the central bank.
But more important was the The ECB’s decision in June to offer four-year liquidity loans, called T-LTRO, banks which, in the same way as the Fed’s support purchases of bonds, aimed at increasing economic activity. In addition, the ECB would thus also prepare for the future begin to implement outright support purchases of bonds, any ECB president reiterated in Jackson Hole but not developed further.
– We think this is a significant package. Are we done? The answer is no, said Mario Draghi in June.
The reason for the lack for more details about possible future support purchases, called “quantitative easing” QE in English, in the speech in Jackson Hole because liquidity loans must first have an effect on the market. I think Ed Lalanne, analyst at Macro Risk Advisors in New York.
– As for the ECB, so does the first round liquidity loans in September. Then it must go awhile. Then you have all the problems that come with quantitative easing, said Ed Lalanne to SvD Business and refers to the distortions in the economy that the Fed has been criticized for in the United States.
A heavy headache Draghi is the EU labor market. The title of the speech was “Unemployment in the euro zone,” and the ECB president exemplified himself with that Germany has an unemployment rate of around 5 percent, while Spain is at 25 percent. The cut is 11.5 percent.
In combination with the high unemployment rate is also weak growth in the euro zone is a problem.
ECB president, which kept a rather academic speech spiced with numerous curves and graphs, also said that Europe’s economy needs to be stimulated from two directions – both through policy reforms to raise demand, and structural reforms at national and European level.
All, he argued, depends therefore not on the central bank, but politicians also need to launch reforms for demand and create more jobs.
– no amount of budget – or monetary policy measures can offset the need of structural reforms, said Draghi and called for freer local wage structures of the different European markets and industries, the ability to make it easier to hire and extra efforts to overcome the extremely high youth unemployment in some countries such as Spain and Greece.
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