DrEuropean Central Bank (ECB) on hold: Neither in terms of interest rates, nor buying of bonds, nor a planned change in strategy, there is indeed significant news at the moment.
Accordingly, all questions on the topic have always been quoted the same phrases that are often heard at the current press conference. Thus, the central bank lived up to the expectations of many ECB watchers, who had already anticipated a “reassuringly boring” press conference in advance.
The real driver entered the event after about 42 minutes. European Central Bank President Christine Lagarde has been asked what she thinks about the Green Party’s candidate for Chancellor Analina Burbock. She herself had openly admitted that she had little experience in political work.
Lagarde – who, as a central banker, would have argued that it had no right to comment on a member state’s policy as a guardian of currency – took the opportunity to break the boredom of the unified event.
“You don’t have to be gray or white-haired to enter politics and be known for your talent,” said the ECB President, praising the Green Party candidate for chancellor. Burbock is a “young woman very committed to climate change and environmental protection.” These topics are also very important to her personally. Even the ECB President found Burbock’s trampoline skills superb.
The FCA did not go into much detail, even after repeated inquiries about a possible beginning of the end of the bond purchases. Inflation expectations and financing conditions in the eurozone will set the pace. Both are complicated topics and the timeline is difficult.
“We don’t depend on the calendar, only on dates,” Lagarde said. So this was not an issue in the boardroom, it was not even discussed. The performance once again shows that the former French finance minister and former head of the International Monetary Fund (IMF) is still thinking very politically.
For her predecessor Mario Draghi, it was unthinkable to express herself in such detail about the domestic politics of a member state and climate policy preferences. Being a key position, the president of the European Central Bank should be the neutral official for the euro, who has been deliberately excluded from the democratic process in order to be as independent as possible.
Chancellor Merkel also received words of praise from Lagarde: Burbock’s arrival shows that “Chancellor Merkel has not discouraged young women from getting into politics,” the euro’s top official said. “This is the value of an example.”
However, the burning question remains: when will the European Central Bank slowly withdraw from its extremely loose monetary policy? Investors want to know this because it affects the mood in the stock market.
And consumers want to know this, too, for whom the mortgage loan follow-up financing may not be due for another year.
The issue of entering the exit is also very topical as the Bank of Canada already announced this week that it will curtail its bond purchases.
But Lagarde vehemently rejected the idea of limiting the epidemic emergency program. She said curtailing the program was “simply premature”.
Lagarde said the economic outlook for the Eurozone was still “masked by uncertainty”. There is still “a long way to go before crossing the bridge of epidemic and recovery is sustainable and stable.”
The so-called Pandemic Emergency Purchase Program (PEPP) to purchase government and corporate bonds consists of a total of 1.85 trillion euros and will run until at least the end of March 2022.
It was not until the last council meeting in mid-March that the European Central Bank decided to speed up its bond purchases in the second quarter due to the continuing pressure on the economy. In March, the monetary authorities bought 66 billion euros of bonds. In the first two weeks of April, the amount was already around 43 billion euros.
Hence, market participants can continue to rely on cheap money. The expert comments, in turn, were unimaginable. “The traffic light is still green,” writes Ulric Castins, an economist at DWS. Alexander Krueger, chief economist at Bankhouse Lambie, tried the pun. “The European Central Bank is still a PEPPig.”
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