The European Central Bank loosens monetary policy and put into circulation billion , photo:
Thus, the European Central Bank loosens monetary policy and put into circulation billion. From March to September this year, the future will be bought up bonds from the market value of the Eurozone countries about 60 billion euros a month. For the economies of the 19-fives this will mean a lower cost of money and favorable exporters weakening of the euro against other currencies.
– The amount is very significant. This is ultimately an increase in the ECB’s balance sheet, assets, or anything that has halved, from two to three trillion euros. In this sense it is very significant. However, if we compare it with the expectations that had analysts before the decision, they were close to that amount – says Dr. Jakub Borowski, chief economist at Credit Agricole bank, who was a guest of the radio Ones.
How does it work?
European Central Bank will buy, spending every month 60 billion, assets of both private sector debt instrum ents: bonds or other instruments that were issued by the private sector and the governments of the euro area countries. And this is the Rubicon, which exceeded the ECB. He decided to buy up bonds issued by countries of the euro reins present on the market today, which is on the secondary market. Covering all countries. Greece also has a chance that its securities are bought – says guest radio Ones.
Two mechanisms
how it translates to the recovery in the euro zone, the transition from deflation to inflation?
– There are two mechanisms. First, the price of these bonds increases. If the price increases, the interest rate on these bonds falls, because these variables always move in opposite directions. This means that the cost of money falls further. He has so far been significantly decreased. Short-term interest rates are already at zero or negative, while the ECB now says – I move on, I reduced the cost of money in the hor izon of five to ten years. Mario Draghi says up to 30 years, because this is the maturity of these bonds, which will be included in the program – said Dr. James Borowski. So money is cheaper.
– Second part: due to the fact that money is cheaper is less temptation to want this money to buy, or buy euros, to invest in assets denominated in euros. What’s more is the temptation to make it the euro, the ECB will issue, convert to other currencies and invest elsewhere. What will be contributing to a weakening of the euro – says guest Ones.
Euro has weakened significantly since the middle of last year, at about 15 percent. also because the market expected such action by the ECB. There is
impact on the expectations of stakeholders. – The financial markets, but also households consider that the risk of the worst case scenario, which is all the time in the background: deflation, the long-term decline in prices, is moving away. This is ve ry important – complements Dr. Jakub Borowski.
Still, many banks lending limits
Does this translate into lending in the euro area and the fact that companies operating in these countries will have better access to finance?
– We need to look at the results of the survey, which are addressed to the banks. These indicate that when it comes to the supply of credit and availability, the situation is gradually improving. But today, many banks are still in the period of limitation in lending, in order to improve their indicators. These indicators, which reflect the risks associated with them. Therefore, we will have to wait until that lending will start – says guest Ones. If the economy gets
a boost in the form of depreciation, which returns increase, it is also the demand for credit should be increased.
– Demand for credit is secondary to the pulse generated by the ECB – says Dr. Jakub Borowski.
A nd he adds: – Most important is that the economy has not fought in deflation. This is a dangerous scenario.
How in America
ECB follows the path of the US central bank in order to help you get out of the euro zone economy from the crisis. We do, however, much later than the United States and less bold. And that’s not the only difference between what is happening here and overseas.
– This is a European problem that all these actions are too late. And also remember that it is not a question of whether the packages themselves interest rates. This is also the economic package, the environment for entrepreneurs. A good example is what happened in the US shale gas. When it was discovered that it is possible efficient use of sources, erected on the industry. We can compare with what’s going on in this respect in Europe and what the problems are. This illustrates the difference between the attitude of entrepreneurs in the U nited States and Europe – says Lukasz Wardyn, Managing Director of Citi Index for Central and Eastern Europe. Also
Przemysław Ruchlicki of the Chamber of Commerce, who was a guest of PR 24 indicates a copy of the ECB actions to those that have been conducted in the US by the Fed.
– now the European Central Bank wants to copy what they did a few years ago, the Americans in the US and really flood the market with cash, so that this money has been invested in the economy – says Przemysław Ruchlicki, an expert of the National Chamber of Commerce, who was the guest of PR 24 .
This is not the first attempt
ECB has long tried to liven up the euro zone, making low interest rates. Today it remained at the same low level. Index is 0.05 percent.
– The European Central Bank for several years trying to stimulate the economy and slightly increased inflation, a few years ago they were given cheap loans to domestic b anks just in order to provide cheap loans to businesses and consumers. Unfortunately, businesses and consumers do not really want the money, so this experiment did not work – explains the PR guy 24.
What is a reprint
ECB start buying bonds of euro area countries in March . The authors of the plan they hope will propel a sluggish economic situation Eurozone, as well as lead to higher inflation, which in recent months has been dangerously low.
– It works in such a way that national banks have bought government bonds, which really lend governments to finance the budget deficit, which in many countries of the euro area is very high. This money, therefore they can not even hit the economy in the form of loans to businesses and consumers. So the idea is that the ECB will buy these bonds from domestic banks in exchange for euros. So really the bank instead of bonds, which can do nothing gets the euro, which will be able to borrow and circulate – explains Przemysław Ruchlicki of the PCC.
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Once this information gained gold, but against the Swiss franc strengthened slightly, said in a radio Jedynka Bank chief economist at Credit Agricole.
– Gold strengthened, but also franc strengthened. Franc against the euro, which is a little limited beneficial effects of this decision on the zloty against the franc. These are such forces that act in opposite directions. On the one hand, the zloty strengthened, we have a relatively high interest rates, the market expects that part of the money will go to our country and will strengthen the zloty, on the other hand, it is also possible that some of the money may go to Switzerland through various channels, so frank a little faster. While the net effect should be positive for the zloty against the franc. Although not significant – or about guest Ones.
I expected that the coming weeks and months it will be time strong franc. It is better to be at the end of the year. But it’s unlikely that the franc fell below 4 zł. – Frank is currently overvalued – says the economist.
Also, according to other experts, quietly, at least for now can sleep, those who took out a loan in Swiss currency.
Christopher Rzyman, Sylvia Zadrożna, Grazyna Raszkowska
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