The leap in inflation will not change monetary policy. The president of the european central Bank, Mario Draghi, is much dwelt on the increase of 1.1% of the inflation index registered in December, seizing the opportunity not only to clarify when the Ecb will be able to say you have achieved its goal, but also noting that the governing Council was “unanimous in expressing a sense of satisfaction on monetary policy. A way to minimize the differences of opinion within the monetary authority of Frankfurt.
Draghi: inflation is not growing enough. Increase of the Qe if the scenario worsens
inflation for December has not, therefore, impact of monetary policy. The Ecb has wanted to clarify already in the press release introductory press conference that headline inflation has, as expected, “is recently increased, in large part to the base effect in energy prices, while underlying pressure on prices will remain weak. The governing Council will continue to ignore the variations of the inflation if the judge transient and without implications for the prospects of medium-term price stability”.
The indication is very clear. On the basis of futures of oil, the Ecb expects that there will be a further acceleration in the index of prices “in the medium term, while measures of core inflation are expected to rise more granduale in the medium term. It is true, however, that the increase in inflation is not only due to a statistical effect but also, in part, to an actual increase in crude oil prices that will be observed with caution.
The Ecb is grappling with the rising inflation
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“The main question – he said in this regard Dragons – it’s time to understand how great they can be the effects of a second round” the rise of the oil: an expression often used by the Ecb to indicate not indirect effects (on other prices, such as transport) the rise of the crude oil, but the ones on inflation expectations (for example, about market rates or on wage demands). “We keep [the situation] with great attention,” he added. It is not enough, in any case, that the increase in the index of inflation approaching or equal to 2% because the Ecb chants of victory. Draghi explained that the objective must be achieved “in the medium term”, and then without taking into account changes in the transitional or non-controllable by monetary policy (as happens when they are in the game, oil prices). Inflation should also move closer so durable to the objective, and must sustain itself, then without the help of monetary policy. The objective must also be defined for the whole Eurozone and not only for some countries.
the Dragons also wanted to avoid spreading the impression of a major split within the governing council because of the because unexpected of December. Not only has stated that the governing council in its entirety decided to ignore it, but it has also been revealed that the members of the board have been discussed on the decision of December, showing himself to be “unanimous” call it “a proper response to the situation.”
Milan +0,7% with the Fca and the banks, in the red the rest of Europe
Even the few governors who were opposed to the extension of quantitative easing, seems to me, you are in any way changed my mind, according to the reconstruction of the president. “there has been – said Draghi – a sort of admission of guilt in the style of maoist. We simply had a discussion and there was a general satisfaction on the fact that the policy is working”.
The orientation of monetary policy – the conclusion of the board of directors, is “ever more clearly successful”. The president of the Ecb wanted to make a complete list of the results of the Ecb’s strategy: by 2015, he said, we had a quarterly growth of the gdp between 0.3% and 0.6%; in December consumer confidence was at the highest, from April 2015; the index of economic confidence was the highest since march 2011; the index composite Pmi (services and manufacturing) in the component production was the highest since may 2011; the unemployment rate in November was at its lowest since July 2009, while they were created in the three years, 4.5 million jobs. The dispersion of growth of added value is also the smallest since 1997, and therefore underlines the growing integration of the european economies (in spite of the heterogeneity existing, that Draghi has denied).
Why is the Ecb maintains the stimuli in spite of the rise in inflation
From the point of view of monetary policy, has added to the Dragons, there was an increase in inflation expectations in the market measures, but also in those surveys, improved in the short term but stable in the long term; the risk of deflation, however measured, have largely disappeared; the financial conditions have improved; the rates on loans to households and businesses declined significantly. The eterogenità rates on credit between the various countries has declined; credit conditions for businesses have improved and, the “most interesting thing”, the restructuring of the balance sheets of non-financial companies has gone forward in a remarkable way in the last few months (it decreased their leverage).
All right, then? Yes, but the Dragons wanted to highlight the risks generated by the global uncertainty. Nothing, however, which could push the Ecb to change – or prepare for a change in monetary policy. Too soon , the president said, to talk of Trump and its policies; too early to discuss the effects of Brexit.
The only decision taken by the Ecb was then technique: it has been stated that it will be possible purchases of the securities to the public (and only public) with yields below the interest rate on deposits (then under -0,40%), but that will override the bond with higher yields of that level. This means, ” explained the central bank – that the amount of the purchases to lower returns will be different from country to country.
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