The ECB sinks bags to avoid aggressive stimulus measures – The Newspaper

The ECB sinks bags to avoid aggressive stimulus measures – The Newspaper

Friday, October 3, 2014

Mario Draghi, yesterday’s ECB meeting held in Naples Italian ity.

The ECB peeks dense clouds in the economy of the euro zone. The recovery is fragile, inflation is at a disturbingly low rates (0.3% in September), countries like France and Italy have undertaken pending reforms, while the German engine is deep. And, worst of all, the liquidity with the central bank is flooding the market builds up on the insides of banks in a bubble of money, oblivious to the needs of the real economy is directed only improve the balance sheets of the financial sector. Although the language used by the ECB is always cryptic and full of subtle signals, Mario Draghi’s speech shows that the situation is worrying.

“The risks to the economic outlook for the euro area remain . In particular, the recent weakening in the pace of growth, with geopolitical risks could dampen confidence and in particular private investment. In addition, insufficient progress on structural reforms in countries of the euro area constitutes a risk to the economic outlook, “Draghi said.

But nevertheless, the institution decided yesterday, once again, by sticking to orthodoxy and resigned announce stimulus measures more aggressive and unconventional style of the Federal Reserve in the USA, which disappointed the market. Following Draghi’s speech, all markets were stained red. The Ibex-35 suffered the second largest fall of the year to let 3.12% to 10,418 points. European shares experienced one of the worst sessions of the year, with falls that reached 4% in the case of Italian Mib.

BOND PURCHASE / Draghi partially explained the bond purchase program announced earlier September. The ECB will start from this month to purchase covered bonds (bonds) and securitized to banks for a period of two years. This should provide liquidity to the financial sector to lend to businesses, but there were doubts in the market that this would be useful to stimulate the economy yesterday. Furthermore, Draghi did not quantify the amount of the program. Just clarified that the program will increase “significantly” the assets of the ECB. The hose down of money, known as quantitative easing (QE, its acronym in English), is left for another time.

“Draghi has not removed the bazooka , as market speculation. The negative sentiment and tended to by showing the economic slowdown and rising bad data signals such as oil and energy prices declining, which undercut inflation. This seems investors have interpreted Draghi negatively as it has not provided the salvation that was expected of him, “he summed up yesterday Bloomberg Peter Garnry, Equity responsible for equity strategy at Saxo Bank .

GLOBAL SLOWDOWN / For its part, the IMF also warned yesterday that the world economy is weaker now than six months ago and faces the prospect of a ‘poor’ growth in the near future, explained the managing director of the institution, Christine Lagarde. This could be the prelude to downgrade growth forecasts to the body presented next week at the annual meeting with the World Bank, having located in July global growth by 3.4% this year.