ECB ready to ad­just quan­ti­ta­tive-eas­ing

The Pak Banker - - COMPANIES/BOSS -

The Euro­pean Cen­tral Bank is ready to ad­just its quan­ti­ta­tive-eas­ing pro­gram to re­spond to any mar­ket tur­bu­lence amid "un­usu­ally low" in­fla­tion and "dis­ap­point­ing" eco­nomic growth in the euro area.

"While re­cent mar­ket volatil­ity had not ma­te­ri­ally changed the as­sess­ment of the eco­nomic out­look, con­tin­ued el­e­vated un­cer­tainty called for alert­ness and a readi­ness to re­spond, if nec­es­sary," the ECB said in a sum­mary ac­count of its July 15-16 mon­e­tary-pol­icy meet­ing. Gover­nors agreed that "the de­sign of the as­set­pur­chase pro­grams pro­vided suf­fi­cient flex­i­bil­ity for them to be adapted if cir­cum­stances were to change and should the need arise," ac­cord­ing to the re­port. Pol­icy mak­ers ex­pressed con­cern that while in­fla­tion in the 19-na­tion cur­rency bloc seems to have bot­tomed out, the re­gion's re­cov­ery re­mains threat­ened by the Greek cri­sis and by tur­moil in emerg­ing mar­kets. Pres­i­dent Mario Draghi said in his July 16 press con­fer­ence in Frank­furt that the ECB stood ready to use all the tools within its man­date to counter any un­war­ranted tight­en­ing in mon­e­tary pol­icy.

The euro-area econ­omy prob­a­bly ex­panded 0.4 per­cent in the sec­ond quar­ter, un­changed from the pre­vi­ous three months, and a fi­nal read­ing of in­fla­tion held at 0.2 per­cent in July, ac­cord­ing to Bloomberg sur­veys. Euro­stat in Lux­em­bourg will re­lease those re­ports at 11 a.m. on Fri­day.

"The re­cov­ery in the euro area was ex­pected to re­main mod­er­ate and grad­ual, which was con­sid­ered dis­ap­point­ing," the ECB said in the ac­counts. "De­spite the in­crease ob­served since the start of the year, con­sumer price in­fla­tion had re­mained un­usu­ally low."

ECB Ex­ec­u­tive Board mem­ber Peter Praet told the Gov­ern­ing Coun­cil that a re­cent de­cline in oil prices pointed to "re­newed down­ward pres­sure" on in­fla­tion in com­ing months. Even so, core in­fla­tion, which strips out food and energy, showed signs of ac­cel­er­a­tion and price growth was ex­pected to pick up to­ward the end of the year. "While it was still too early to con­firm that a turn­ing point had been reached in un­der­ly­ing in­fla­tion, the key driv­ers of an up­turn ap­peared to be pro­ceed­ing broadly as pro­jected," the re­port said. "Medium-term in­fla­tion ex­pec­ta­tions had re­cov­ered some of the ground lost since the sum­mer of last year."

Gover­nors de­cided to con­tinue to "closely mon­i­tor" fi­nan­cial mar­kets. They as­sessed that the July agree­ment be­tween Greece and its cred­i­tors to start bailout talks "sig­nif­i­cantly re­duced" the risks of neg­a­tive reper­cus­sions across the re­gion. They also said tur­bu­lence in Chi­nese fi­nan­cial mar­kets may have a "larger-thanex­pected ad­verse im­pact" be­cause of the coun­try's promi­nence in global trade. China shocked in­vestors this week by al­low­ing mar­kets greater sway in set­ting the yuan's ex­change rate, trig­ger­ing the cur­rency's big­gest sell­off in 21 years and roil­ing global mar­kets.

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