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Choppy Markets Underscore Why ECB Will Take It Slow

The European Central Bank is laying the groundwork for a shift in its stance. The bigger question perhaps is what the market backdrop will be when the ECB meets in June to decide on the matter.

The sense that the ECB is taking baby steps toward an exit from its ultraloose monetary policy settings is underlined by the account of its April meeting, released Thursday. If the eurozone economy can maintain its tone, then “due consideration” will need to be given to adjusting the ECB’s forward guidance, which still says it could cut rates or increase bond purchases again. Further down the road, policy normalization will move onto the agenda.

The ECB remains concerned, however, about external risks to the outlook—which may yet pose a problem for the central bank, as it has in the past for the U.S. Federal Reserve. It specifically pointed to uncertainty around the prospects for policy in the U.S. that have sprung into the foreground with drama swirling around President

Donald Trump.

Emerging markets are also on the watch list, and Thursday brought a steep decline in Brazilian stocks, bonds and the real.

Closer to home, there are still signs of worry that inflationary pressures in the eurozone remain weak. The ECB is starting to wrestle with a conundrum that is already challenging other central banks: what has happened to wage growth?

All of that together speaks to an ECB that will tread carefully. Executive Board member Peter Praet warned of the need for ECB officials to be “particularly cautious” in talking about how policy might change. The experience of the Fed in the “taper tantrum” is clearly fresh in the memory. The ECB will have to bite the bullet, but it is in no rush to do so.

Write to Richard Barley at

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