On Thursday (September 13th), the European Central Bank (ECB) announced that it will maintain the three key interest rates unchanged. It will maintain a monthly debt purchase of 30 billion euros until the end of September 2018. It will end its purchase in December 2018 and will maintain The current key interest rate remains unchanged until at least the summer of 2019.
At the same time, the European Central Bank lowered its GDP growth forecast for 2018 and 2019, maintaining inflation expectations for the next three years. It is expected that the GDP growth rate of the Eurozone in 2018 will be 2%, the previous value is 2.1%; the GDP growth rate is expected to be 1.8% in 2019, and the previous value is 1.9%.
In addition, European Central Bank President Mario Draghi said that the downside of economic expectations is due to weak external demand, and the euro zone’s economic growth has been higher than the potential growth rate for some time. At present, domestic cost pressures are constantly tiring, and protectionism and emerging market risks are prominent.
However, at the subsequent press conference, Draghi “changed his face” and unexpectedly released positive comments, expressing his willingness to watch the inflation outlook, saying that the uncertainty of the inflation outlook is declining, and inflation is moving closer to our goal, even if QE is over. Inflation can still move closer to 2%, and core inflation levels will rise before the end of the year.
During Draghi’s press conference, the euro/ dollar reversed the previous decline, and the short-term sharp rise of 90 points, breaking the 1.17 mark for the first time on August 30.
On Friday (September 14), Rabobank analysts pointed out that the European Central Bank (ECB) monetary policy normalization still has a long way to go. So the next risk is that when the next recession comes, the ECB has little room to act.
The Dutch Cooperative Bank pointed out that if this is the case, it will depend on whether the fiscal policy at the time can stabilize the economy. At present, most countries in the Eurozone do not seem to have enough fiscal space to properly carry out this task, which may increase the impact of the next recession.
At the same time, the bank’s analysts pointed out that the current eurozone debt ratio and budget balance show that compared with the pre-crisis 2007, the financial situation of the eurozone countries has not improved or even worse.
In addition, the Dutch cooperative bank pointed out that given the current economic performance of the eurozone countries, it is now a buffer. Unfortunately, however, European fiscal rules are ineffective in forcing countries to significantly increase their savings during the boom.