"The ECB has finally become a reality"
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The European Central Bank also has much more pessimistic expectations for the euro zone. She still does not want to respond, but makes it clear: you have the tools. Complying with it would mainly be the savers.
Dhe melody of the day was set on Thursday morning. It became known that the private sector of the eurozone is on the brink of stagnation. The PMI surprisingly dropped in January by 0.4 points to 50.7 points. That is the worst value in five and a half years, the institute told IHS Markit. If this barometer falls below 50 points, a recession is likely.
The European Central Bank does not explicitly see this. And yet: ECB president Mario Draghi sounded a lot of pessimism during his press conference in the afternoon. Growth momentum is weaker than previously thought, he said. For the first time since April 2017, the ECB sees the growth risk & # 39; s again downwards. However, she still does not want to respond, but waits until March to see if this economic slowdown is permanent. But Draghi also made it clear that if necessary, the ECB will respond.
On Thursday, however, the ECB left the policy rate at 0.0 percent since March 2016. When banks overnight book excess liquidity at the ECB, they continue to pay a fine of 0.4 percent. These rates would remain so, at least until the summer, Draghi emphasized. In addition, the ECB intends to reinvest the maturing bonds it has acquired as part of its bond purchase program for a longer period. Since March 2015, it has invested more than € 2.6 trillion in corporate and government bonds.
Draghi also devoted in detail to the prospects for the economy of the euro zone. He mentioned a number of reasons for the deterioration. One reason is the growing protectionism and doubts about the multilateral rules, as they have been since the end of the Second World War. Add to this the unclear outcome of Brexit, the political developments in some euro countries, the weakness of the German automotive industry, the final stimulus of the American tax cuts and the weak growth in China. "The European Central Bank has finally become a reality," says Carsten Brzeski, chief economist at ING.
"A complete toolbox is ready"
Only with one of these problems does the ECB Council really feel confident that this can be solved: China. It is assumed that the local government is taking action, so that this delay will be temporary. On the other hand, there are opposing opinions. Some believed that a positive solution could be found, others did not.
But whether or not the problems have been resolved depends ultimately on whether the period of economic weakness will be temporary or permanent. In order to better assess this, they have decided to wait until March and to reassess the situation against the background of new facts.
Draghi also turned to those critics who claim that the ECB can not respond because they have no money at all – the interest is already zero, the bond purchase program had already reached its legal limits before the end, because the maximum possible amounts were almost exhausted. "The ECB will not run out of instruments, a full tool kit is ready," he said.
At the same time, Draghi has not ruled out that it can also go the other way. The ECB considers it unlikely for a recession, the development on the labor market and wages is good and the banks are all in good shape. This indirectly made it clear that a first rate hike by the ECB can still not be excluded this year. At the same time, however, the penalty interest on bank overnight stays must be abolished. The most important interest rates, which are ultimately also relevant for savers, should remain at zero per cent for some time to come.
And if the assessment of the data in March shows that the situation is more serious than expected, this zero-interest phase will take much longer. Then Draghi should at least change his interest rate. "Possible than unchanged interest rates until the end of 2019," says Thomas Gitzel, Chief Economist VP Bank. "Negative interest rates are likely to be kept for all of us over a longer period of time."