ECB printer warm – Republic

Source: Bloomberg

ECB on Monday will proceed to buying government bonds for designing the money, even though his own forecasts indicate an improvement in the economic situation of the euro area.

As of Monday, the European Central Bank will dedicate to the purchase of assets for designing the money, or so. program of quantitative easing (QE), and 60 billion euros a month, instead of 13 billion, as in the past few months.

The decision to extend QE, the Governing Council of the ECB decided in January, but only at the Thursday meeting Nicosia (Cyprus) stated when this happens. Dispelled a few other concerns regarding this program.

Optimistic forecasts

Some economists feared that the Governing Council may lose the will to stimulate the economy of the euro area in relation to the visible recently upturn. That has not happened, but the latest ECB forecasts of economists – that members of the decision-making body met before Thursday’s meeting – confirm that the eurozone economy is accelerating. Its GDP is expected to rise this year by 1.5 per cent., And not by 1 percent., As suggested by the ECB in December forecast. In the next two years, growth has accelerated to 1.9 and 2.1 percent. It needs clearly more optimistic than the median forecast of economists surveyed by Bloomberg agencies, according to which the Eurozone GDP will grow this year by 1.2 per cent., And in 2016 and 2017. About 1.5-1.6 percent.

The ECB economists see a chance to go back next year consumer price growth to the target of the institution, or to just below 2 percent. per year. On average, in 2016. Inflation is expected to be 1.5 per cent., While in February prices fell by 0.3 percent. year on year.

In light of these predictions may seem that the ECB will be able to stop QE earlier than the end of September 2016., which indicates the initial date of completion of the program. At Thursday’s press conference president Mario Draghi noted, however, that the ECB economists optimism partly reflects the expected effectiveness of QE.

Gold may gain

In response to the message of the ECB and Draghi speech euro exchange rate against the dollar fell to its lowest level in 11 years 1.10. Apparently, market participants believe that the European QE will have performed a large scale. Earlier aroused doubts among calculation according to which the barrier will be QE insufficient supply of certain bonds, eg. Germany. The more that the ECB on Thursday warned that there will be bought up securities yielding less than the deposit rate, which currently stands at 0.2 percent. This excludes eg. German two year olds. Frankfurt institution explained, however, that in the event of shortages of some securities Eurozone central banks, which will be contractors QE will be able to replace them with bonds of some European financial institutions.

The ECB’s determination to carry out QE despite economic recovery may result in appreciation of the zloty even after Wednesday’s interest rate cut by the MPC, which was to alleviate this effect. According to Piotr Kalisz, chief economist at Citi Handlowy, it could force the MPC to break a declaration that the monetary easing cycle has been completed. For this purpose, however, the euro in gold would have to fall clearly below 4 zł. Thursday was the lowest since July last year, hovered around 4.14 zł.