The ECB, concerned about low rates: "There will be little growth"



The European Central Bank (ECB) will maintain current interest rates. The new boss, Christine LagardeHe said that throughout 2020 the institution will undergo a review with the novelty of including in this analysis the economic impact of climate change. Lagarde, former director of the International Monetary Fund from 2011 to 2019, in office since November, had already announced in December that would remove "every stone of the institution" to check if the monetary strategy is on the right track. The ECB exam will be thorough and has not been carried out since 2003, says the German press. The chief economic officer of Targobank explained to the Frankfurter Neue Presse newspaper that Lagarde could not soon get out of the monetary policy framework of his predecessor Mario Draghi. "The anchor of the monetary policy is so strongly assured that it has no choice but to give continuity to the flexible monetary policy," he explained.

The situation is not new and shows how The Eurozone crisis has not been overcome. "For decades, the ECB has been trying to reactivate the situation in the euro zone and to redirect inflation in the direction ordered by the central bank with a tide of cheap money," wrote the German weekly Spiegel, who warned that the prolonged low prices They could stop the investment. I also remembered that this low interest hurts banks They have to pay 0.5% interest to the ECB for having money parked at the Central Bank while small savers receive almost no interest to keep their money in the bank. Those who acquire a loan, however, enjoy more favorable conditions in comparison. In this regard, Lagarde said that “it is necessary to substantially accelerate the implementation of structural policies in the countries of the euro zone to boost productivity and growth potential, as well as reduce structural unemployment and increase the resilience of governments” . In fact, he assured that "The low rates worry because it means there will be low growth".

Economist Klaus-Rainer Jackisch said on German public television ARD that 2020 "will be sad again for savers", not so for shareholders "who may rejoice in the upward trend." However, he says, the situation could change in the next year if after the internal review the ECB decides to lower its inflation target to 1.5%, which is currently at 2: “Thus there would be no more justification for maintain the current monetary policy and this could open the way to a change in interest policy. ”

On the other hand, on March 24 the German Constitutional Court will issue a verdict on the purchase of bonds by the European Central Bank, the institution reported Thursday. The decision of the court could prohibit the German Federal Bank from participating in the purchase of state bonds, which would collide with the verdict of the Court of Justice of the European Union (4) of 2018 according to which said chamber reached the conclusion of that "the purchase of sovereign bonds in secondary markets does not violate Union law." The acquisition of the bonds began in 2015 in the middle of the euro crisis and until the end of 2018 the ECB had bought bonds worth 2.6 billion euros. In November the outgoing president of the ECB Mario Draghi announced that the purchase was restarted again worth 20,000 million euros per month.

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