This article is from the source 'guardian' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.
You can find the current article at its original source at https://www.theguardian.com/business/live/2018/jun/14/ecb-qe-stimulus-mario-draghi-fed-rate-hike-uk-retail-sales-business-live
The article has changed 6 times. There is an RSS feed of changes available.
| Version 4 | Version 5 |
|---|---|
| ECB to end QE in December, but keep rates at record lows - as it happened | ECB to end QE in December, but keep rates at record lows - as it happened |
| (6 months later) | |
| The European Central Bank has shrugged off evidence of a slowdown in the eurozone and announced that it will phase out the stimulus provided by its massive three-year bond-buying programme to the eurozone economy by the end of the year, our economics editor Larry Elliott writes. | The European Central Bank has shrugged off evidence of a slowdown in the eurozone and announced that it will phase out the stimulus provided by its massive three-year bond-buying programme to the eurozone economy by the end of the year, our economics editor Larry Elliott writes. |
| Despite warning that the single currency area was going through a soft patch at a time when protectionist risks were rising, the ECB said it would wind down its bond purchases over the next six months. | Despite warning that the single currency area was going through a soft patch at a time when protectionist risks were rising, the ECB said it would wind down its bond purchases over the next six months. |
| The ECB is currently boosting the euro zone money supply by buying €30bn of assets each month, but this will be reduced to €15bn a month after September and ended completely at the end of the year. | The ECB is currently boosting the euro zone money supply by buying €30bn of assets each month, but this will be reduced to €15bn a month after September and ended completely at the end of the year. |
| Draghi: We anticipate that, after September 2018, subject to incoming data confirming our medium-term inflation outlook, we will reduce the monthly pace of the net asset purchases to €15 billion until the end of December 2018 and then end net purchases | Draghi: We anticipate that, after September 2018, subject to incoming data confirming our medium-term inflation outlook, we will reduce the monthly pace of the net asset purchases to €15 billion until the end of December 2018 and then end net purchases |
| The move follows strong pressure from some eurozone countries, led by Germany, that were uncomfortable about the more than €2.4tn of assets accumulated by the ECB since it launched its quantitative easing programme at the start of 2015. | The move follows strong pressure from some eurozone countries, led by Germany, that were uncomfortable about the more than €2.4tn of assets accumulated by the ECB since it launched its quantitative easing programme at the start of 2015. |
| Mario Draghi, the ECB’s president, said at the end of a meeting of the bank’s governing council in Latvia, that the QE programme had succeeded in its aim of putting inflation on course to meet its target of being below but close to 2%. | Mario Draghi, the ECB’s president, said at the end of a meeting of the bank’s governing council in Latvia, that the QE programme had succeeded in its aim of putting inflation on course to meet its target of being below but close to 2%. |
| Eurozone activity has accelerated markedly over the past three years, with some estimates suggesting that QE contributed 0.75 percentage points a year to the average 2.25% annual growth rate. | Eurozone activity has accelerated markedly over the past three years, with some estimates suggesting that QE contributed 0.75 percentage points a year to the average 2.25% annual growth rate. |
| The ECB’s statement reflected the battle between hawks and doves on the bank’s council, with the decision on QE matched by a softening of its approach to interest rates. | The ECB’s statement reflected the battle between hawks and doves on the bank’s council, with the decision on QE matched by a softening of its approach to interest rates. |
| Draghi said there would be no prospect of an increase in the ECB’s key lending rate – currently 0.0% – until next summer at the earliest. | Draghi said there would be no prospect of an increase in the ECB’s key lending rate – currently 0.0% – until next summer at the earliest. |
| Draghi: The discussion on keeping interest rates at their present levels through summer 2019 does not imply that the savers are being denied of their income and interest because savers can invest in other assets and they have done so | Draghi: The discussion on keeping interest rates at their present levels through summer 2019 does not imply that the savers are being denied of their income and interest because savers can invest in other assets and they have done so |
| More here... | More here... |
| ECB calls halt to quantitative easing, despite 'soft' euro | |
| That’s all for today. Thanks for reading and commenting. GW | That’s all for today. Thanks for reading and commenting. GW |
| Europe’s stock markets have surged today, as traders take the ECB’s decision to end QE in their stride. | Europe’s stock markets have surged today, as traders take the ECB’s decision to end QE in their stride. |
| In London the FTSE 100 has jumped 62 points to 7765, a gain of 0.8%. There are headier gains across Europe, as the sliding euro boosts exporters. | In London the FTSE 100 has jumped 62 points to 7765, a gain of 0.8%. There are headier gains across Europe, as the sliding euro boosts exporters. |
| David Madden of CMC Markets says Draghi’s pledge not to raise interest rates before next summer, at the earliest, cheered markets. | David Madden of CMC Markets says Draghi’s pledge not to raise interest rates before next summer, at the earliest, cheered markets. |
| European stocks have soared as it appears the European Central Bank (ECB) won’t be hiking interest rates until at least the back end of 2019. Mario Draghi, the ECB chief, confirmed the stimulus package would be wound down in 2018, and we could see a taper of the bond buying scheme in the final quarter of this year. | European stocks have soared as it appears the European Central Bank (ECB) won’t be hiking interest rates until at least the back end of 2019. Mario Draghi, the ECB chief, confirmed the stimulus package would be wound down in 2018, and we could see a taper of the bond buying scheme in the final quarter of this year. |
| The update was far more dovish than some traders were expecting, and the euro sold off heavily on the back of it. The slide in the single currency prompted buying of eurozone equities. | The update was far more dovish than some traders were expecting, and the euro sold off heavily on the back of it. The slide in the single currency prompted buying of eurozone equities. |
| Mike Ingram, chief market strategist at WHIreland, agrees that Mario Draghi was more dovish than expected today. | Mike Ingram, chief market strategist at WHIreland, agrees that Mario Draghi was more dovish than expected today. |
| The pledge not to raise interest rates for at least a year has caught traders unawares. It has trumped the decision to end the bond-buying stimulus programme in December - which is why the euro has fallen, not risen, today. | The pledge not to raise interest rates for at least a year has caught traders unawares. It has trumped the decision to end the bond-buying stimulus programme in December - which is why the euro has fallen, not risen, today. |
| Ingram explains: | Ingram explains: |
| The ECB has (conditionally) pre-committed to keeping interest rates at their current, extraordinarily low levels until at least the summer of 2019 and in any event ‘as long as necessary’. | The ECB has (conditionally) pre-committed to keeping interest rates at their current, extraordinarily low levels until at least the summer of 2019 and in any event ‘as long as necessary’. |
| This sort of language was not expected from the ECB until the end of the 2018 and was the most biggest dovish surprise for markets. Up until this point, markets had been expecting about a 40% change on an ECB rate hike in a year’s time. | This sort of language was not expected from the ECB until the end of the 2018 and was the most biggest dovish surprise for markets. Up until this point, markets had been expecting about a 40% change on an ECB rate hike in a year’s time. |
| Elsewhere in the markets, some extremely strong US retail spending figures have cheered investors. | Elsewhere in the markets, some extremely strong US retail spending figures have cheered investors. |
| US retail sales jumped by 0.8% in May, new data shows, and were up 5.9% over the past 12 months. | US retail sales jumped by 0.8% in May, new data shows, and were up 5.9% over the past 12 months. |
| That suggests US consumers are confident, and spending accordingly. And it means the US economy could be running faster than thought - perhaps at a sizzling annual rate of over 4%. | That suggests US consumers are confident, and spending accordingly. And it means the US economy could be running faster than thought - perhaps at a sizzling annual rate of over 4%. |
| This has driven the US dollar higher, and helped to pull the euro and pound down. | This has driven the US dollar higher, and helped to pull the euro and pound down. |
| Dovish ECB guidance + strong US retail sales = EURUSD slammed 1% pic.twitter.com/VJ1sz6U6GQ | Dovish ECB guidance + strong US retail sales = EURUSD slammed 1% pic.twitter.com/VJ1sz6U6GQ |
| Atlanta Fed raises its Q2 GDP tracker to 4.8% from 4.6% | Atlanta Fed raises its Q2 GDP tracker to 4.8% from 4.6% |
| It’s official: Greece has just unlocked the next €1bn of its bailout programme, having satisfied its lenders that its meeting its targets. | It’s official: Greece has just unlocked the next €1bn of its bailout programme, having satisfied its lenders that its meeting its targets. |
| #Greece continues to deliver on commitments.Another milestone completed in arrears clearance allows the @ESM_Press to disburse the pending €1bn. Today’s ESM board decision is a good omen for the discussions on program exit in next week’s #Eurogroup pic.twitter.com/YLdU5Jvq2g | #Greece continues to deliver on commitments.Another milestone completed in arrears clearance allows the @ESM_Press to disburse the pending €1bn. Today’s ESM board decision is a good omen for the discussions on program exit in next week’s #Eurogroup pic.twitter.com/YLdU5Jvq2g |
| Over in Athens MPs have just approved the last multi-bill of reforms the country will have to take before its bailout expires this summer. | Over in Athens MPs have just approved the last multi-bill of reforms the country will have to take before its bailout expires this summer. |
| It means fresh austerity and economic reforms for Greece, as our correspondent Helena Smith reports. | It means fresh austerity and economic reforms for Greece, as our correspondent Helena Smith reports. |
| Final results saw 154 deputies vote in favour of the draft bill – which foresees more pension cuts, labour market regulations, health care measures and sell-offs in the energy sector – and 144 against. | Final results saw 154 deputies vote in favour of the draft bill – which foresees more pension cuts, labour market regulations, health care measures and sell-offs in the energy sector – and 144 against. |
| The ballot took place in an atmosphere of growing political drama in Athens following the decision of the main opposition conservative party to call a vote of no-confidence in prime minister Alexis Tsipras’ government over its handling of the Macedonia name row, and an accord unveiled earlier this week, that will see the Slavic state being renamed the Republic of North Macedonia. | The ballot took place in an atmosphere of growing political drama in Athens following the decision of the main opposition conservative party to call a vote of no-confidence in prime minister Alexis Tsipras’ government over its handling of the Macedonia name row, and an accord unveiled earlier this week, that will see the Slavic state being renamed the Republic of North Macedonia. |
| Addressing parliament, Tsipras said he welcomed the motion. | Addressing parliament, Tsipras said he welcomed the motion. |
| Here’s Danielle Haralambous, UK Analyst at the Economist Intelligence Unit, on the ECB’s announcement and press conference: | Here’s Danielle Haralambous, UK Analyst at the Economist Intelligence Unit, on the ECB’s announcement and press conference: |
| “Mr Draghi acknowledged that risks from an increase in protectionism and financial market volatility had become more prominent, but maintained a relatively positive view of the outlook, brushing off signs of softer economic growth in the euro zone that prompted quite a sizeable a downward revision to the ECB’s forecast for 2018, to 2.1% from 2.4% previously. However higher oil prices and rising domestic cost pressures meant that the bank’s forecasts for inflation went up to 1.7% in both 2018 and 2019, from 1.4% previously. | “Mr Draghi acknowledged that risks from an increase in protectionism and financial market volatility had become more prominent, but maintained a relatively positive view of the outlook, brushing off signs of softer economic growth in the euro zone that prompted quite a sizeable a downward revision to the ECB’s forecast for 2018, to 2.1% from 2.4% previously. However higher oil prices and rising domestic cost pressures meant that the bank’s forecasts for inflation went up to 1.7% in both 2018 and 2019, from 1.4% previously. |
| Against this backdrop the ECB felt ready to announce moves towards a less accommodative policy stance, albeit not an overtly hawkish one. Principal payments from maturing securities under the asset purchase programme will continue to be reinvested, and the forward guidance on interest rates demonstrates that the bank is planning to keep policy loose for some time. Mr Draghi added that the ECB stands ready to adjust all of its instruments if necessary. | Against this backdrop the ECB felt ready to announce moves towards a less accommodative policy stance, albeit not an overtly hawkish one. Principal payments from maturing securities under the asset purchase programme will continue to be reinvested, and the forward guidance on interest rates demonstrates that the bank is planning to keep policy loose for some time. Mr Draghi added that the ECB stands ready to adjust all of its instruments if necessary. |
| We had expected the ECB’s net monthly asset purchases to be reduced in the final months of 2018 and now expect a first move towards policy normalisation in 2019, with an increase in the deposit rate, and a rise in the main refinancing rate in early 2020. The next rate hike will probably be delivered by the successor to Mr Draghi, whose term ends in October 2019.” | We had expected the ECB’s net monthly asset purchases to be reduced in the final months of 2018 and now expect a first move towards policy normalisation in 2019, with an increase in the deposit rate, and a rise in the main refinancing rate in early 2020. The next rate hike will probably be delivered by the successor to Mr Draghi, whose term ends in October 2019.” |
| Jan von Gerich, chief strategist at Nordea Markets, predicts that the ECB won’t raise interest rates until the end of next year: | Jan von Gerich, chief strategist at Nordea Markets, predicts that the ECB won’t raise interest rates until the end of next year: |
| The end of net purchases does not mark the end of very loose policy. In fact, Draghi sounded dovish today, and we still expect the first rate hike only in December 2019. Nevertheless, the peak in the balance sheet is close. https://t.co/Y2sYqoqbM7 pic.twitter.com/hma5gMcMGc | The end of net purchases does not mark the end of very loose policy. In fact, Draghi sounded dovish today, and we still expect the first rate hike only in December 2019. Nevertheless, the peak in the balance sheet is close. https://t.co/Y2sYqoqbM7 pic.twitter.com/hma5gMcMGc |
| Candice Bangsund, vice president and portfolio manager at Fiera Capital, says today’s meeting had something for hawks and doves. | Candice Bangsund, vice president and portfolio manager at Fiera Capital, says today’s meeting had something for hawks and doves. |
| “Despite political turmoil in the Eurozone’s periphery and a recent soft patch of economic results, the ECB has set the stage for an end of QE later this year. Indeed, for the hawks, the ECB announced that it will taper the pace of monthly asset purchases after September (from €30bn/month to €15bn/month) and then end the purchase program in December. | “Despite political turmoil in the Eurozone’s periphery and a recent soft patch of economic results, the ECB has set the stage for an end of QE later this year. Indeed, for the hawks, the ECB announced that it will taper the pace of monthly asset purchases after September (from €30bn/month to €15bn/month) and then end the purchase program in December. |
| “However, for the doves – the ECB tempered this stance somewhat by reiterating its pledge that interest rates will remain unchanged until the back-half of 2019 (“at least through the summer of 2019”) – which is slightly longer than markets were expecting.” | “However, for the doves – the ECB tempered this stance somewhat by reiterating its pledge that interest rates will remain unchanged until the back-half of 2019 (“at least through the summer of 2019”) – which is slightly longer than markets were expecting.” |
| And finally, Draghi denies that the ECB plotted against the new Italian government by stopping buying its bonds last month. | And finally, Draghi denies that the ECB plotted against the new Italian government by stopping buying its bonds last month. |
| There’s not conspiracy here, he insists. | There’s not conspiracy here, he insists. |
| Draghi on the 5 Star/League theory that the ECB caused the market turmoil in Italy in May: "No conspiracy here" (said with a wry smile) | Draghi on the 5 Star/League theory that the ECB caused the market turmoil in Italy in May: "No conspiracy here" (said with a wry smile) |
| That’s the end of the press conference. | That’s the end of the press conference. |
| Q: What impact will the US tariffs, and worries about a trade war, have on the Eurozone? | Q: What impact will the US tariffs, and worries about a trade war, have on the Eurozone? |
| Draghi says that the ECB’s latest economic forecasts do not include the effects of trade measures that have not been implemented yet. | Draghi says that the ECB’s latest economic forecasts do not include the effects of trade measures that have not been implemented yet. |
| They only include measures that have already been imposed, and the impact of these is pretty limited. | They only include measures that have already been imposed, and the impact of these is pretty limited. |
| Draghi then warns that trade discussions must take place within the “existing multilateral framework”. | Draghi then warns that trade discussions must take place within the “existing multilateral framework”. |
| That is as important as the nature of the measure under discussion, Draghi says sternly. | That is as important as the nature of the measure under discussion, Draghi says sternly. |
| Otherwise, great damage could be caused if the multilateral framework created after the end of the second world war, and has helped create prosperity since, is undermined, he concludes. | Otherwise, great damage could be caused if the multilateral framework created after the end of the second world war, and has helped create prosperity since, is undermined, he concludes. |