06.03.2015 23:48
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Friday, March 6, 2015
The European Central Bank began an aggressive printing of money, the euro plummeting – a REGNUM
The European Central Bank announced that it has Next week begins the so-called quantitative easing of 60 billion euros monthly – bonds of the eurozone countries will buy until September 2016 (more than one trillion euros for the whole period), and if need be, and for an unlimited time, as long as inflation does not become closer to level of 2%. Simply put, the ECB “includes”, “press the euro.” According to IA REGNUM today, March 6, in the Lithuanian branch largest Danish bank Danske Bank, market reaction and improved forecasts of the ECB on GDP and inflation lead us to believe that the strongest measures used by the bank finally shifted the economy Eurozone in terms of stagnation, but not fully known to what effect this will lead.
The ECB also said that he would not buy bonds whose yield is less than the interest rate of the ECB deposits – 0.2%. In the market there are now bonds whose yields below these percentages, for example, the German bonds with a short term 2-4 years.
On the other hand, such a statement does not mean that soon you can wait for another reduction of interest rate of deposits to all bonds fall within the scope of the program of buying bonds. Simply, if the ECB still and so reduce the negative interest rate deposits, experts say the bank, “we will have to answer the question – which came first: the chicken or the egg»?
«And indeed, it is unlikely that the ECB will be accepted for this game “- believe in Danske Bank.
During the meeting, the ECB also noted that the National Bank of the eurozone will be allowed to operate fairly independently, and also the Bank of Lithuania. On the other hand, it has been observed that national banks will have to concentrate on buying government bonds of the country. For example, the Bank of Lithuania will have all the authority to buy a certain number of securities of the Lithuanian government – up to 25% of a particular issue. This limit is set for the first six months of buying, and then, if necessary, may be revised.
The ECB, in announcing the program of quantitative easing, at the same time improved the forecast of inflation and GDP in the euro area. The increase in GDP growth forecast expected between about inflation forecasts were doubts – could have been expected that the ECB will reduce the forecast, but the opposite happened. According to the latest forecasts of the ECB, euro zone GDP growth in 2015 should reach 1.5% in 2016 – 1.9%, in 2017 – 2.1%. Inflation should accordingly reach 0% in 2015, 1.5% – in 2016, 1.8% – in 2017.
«Improved growth forecasts for the euro area economy and inflation gave optimism to investors – stock markets have risen and bond yields continue to experience downward pressure (although it is difficult to find an explanation of how close to zero can snuggle interest rate debt of the euro area). However, the euro at the beginning of the meeting of the ECB rose, then slid to its lowest level in 13 years and further rolls down “- the economist said.
Analysts bank Danske Bank forecast that the euro against the US dollar and more will fall, and for the next few months should reach the level of 1,05.
The reason for the fall of the euro against the US dollar – a significant difference between the monetary policy of the eurozone and the US, where the euro zone is only now beginning aggressive printing of money. The US Federal Reserve, by contrast, is likely to begin to raise the benchmark interest rate is still in the middle of this year. Probably, it will affect the behavior of investors, when more funds will be channeled into assets denominated in US dollars, for the most possible profit. Under the current monetary policy, investors probably will not want to invest in assets denominated euro, due to low interest and will be inclined to get rid of the euro.
«This trend is expected to change in the second half of the year. If fulfilled expectations and the ECB and the markets about the euro zone’s economic growth and rising inflation, the euro is likely to straighten. Should appear expectations concerning the growth rate of interest, and it will attract investors to financial assets denominated in euros, and increase the demand for euros. This will create conditions for strengthening of the euro against the US dollar, “- according to the bank.
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