Low euro-area growth supports case for ECB action

2016 ◽  
Keyword(s):  
Monetary Policy ◽  
Euro Area ◽  
Private Consumption ◽  
Oil Prices ◽  
National Data ◽  
Deposit Rate ◽  
Content Type ◽  
The Third ◽  
Area Growth ◽  
Near Term

Significance This is the same pace as in the third quarter, marking the eleventh consecutive quarter of expansion. For January-December, growth accelerated to 1.5% from 0.9% in 2014, in line with the December ECB staff projection. National data were generally below market expectations, but confirmed that the recovery remains on track. Impacts Private consumption will remain the primary growth driver in the near term, supported by recovering labour markets and low inflation. Inflation will stay subdued owing to falling oil prices; the recovery is too lacklustre to kick off a rise in prices. The ECB will expand its QE programme in March, cutting the deposit rate deeper into negative territory. After its recent rebound, the euro should weaken again as the ECB eases monetary policy further.

Euro-area GDP growth will slow in 2019

2019 ◽  
Keyword(s):  
Monetary Policy ◽  
Euro Area ◽  
Balance Sheet ◽  
Lower Growth ◽  
Content Type ◽  
Large Size ◽  
Area Growth ◽  
Risks Assessment ◽  
European Parliament Elections ◽  
The Impact

Subject Reasons behind the euro-area growth slowdown. Significance In its Winter 2019 interim forecasts, the European Commission downgraded its expectations for euro-area growth to 1.3% and 1.6% for 2019 and 2020, respectively, from 1.9% and 1.7% three months earlier. At its January meeting, the ECB Governing Council foreshadowed lower growth, shifting its risks assessment, saying that downside risks will dominate. Impacts The European Parliament elections could have a destabilising impact on growth in some countries. Monetary policy can do nothing to cushion the impact of lower growth caused by trade conflict. In case of recession, monetary policy stimulus will be constrained by the large size of the ECB balance sheet.

Market nerves roil Turkey and Central Europe

2016 ◽  
Keyword(s):  
Monetary Policy ◽  
Fiscal Policy ◽  
Financial Markets ◽  
Central Europe ◽  
Euro Area ◽  
Inflection Point ◽  
Oil Prices ◽  
Oil Price ◽  
Content Type ◽  
Policy Guidance

Significance Markets have taken badly the Fed's more hawkish policy guidance for 2017, not expecting such a shift in monetary policy so soon. The shift in US monetary policy comes just as the ECB is preparing the ground for the gradual withdrawal of monetary stimulus. While Turkish assets are the most vulnerable partly because of the severe escalation in political risk, the Polish zloty is also at risk thanks mainly to its status as one of the most liquid EM currencies. Impacts Investors see global financial markets at an inflection point as monetary policy gives way to fiscal policy as the main source of stimulus. This monetary-to-fiscal shift will fuel uncertainty about the direction of asset prices. Rising oil prices will allay concerns about deflation in the euro-area. As major Emerging Europe currencies suffer, the ruble is rising against the dollar amid oil price rises and Trump’s Russia-friendly remarks.

Prospects for euro-area to end-2020

2020 ◽  
Keyword(s):  
Monetary Policy ◽  
Euro Area ◽  
Economic Downturn ◽  
Content Type ◽  
The Third ◽  
Bounce Back ◽  
The Eu

Subject Prospects for euro-area to end-2020. Significance The euro-area is facing its most challenging economic downturn to date. The ECB has responded with strongly supportive monetary policy and both Germany and the EU have adopted unprecedented fiscal measures, increasing the prospects of a stronger recovery in the third and fourth quarters, and building momentum for a strong bounce back in 2021.

Prospects for South-east Asia in the third quarter

2015 ◽  
Keyword(s):  
East Asia ◽  
Private Consumption ◽  
Oil Prices ◽  
Consumer Confidence ◽  
South East Asia ◽  
Content Type ◽  
The Third ◽  
Domestic Policies

Subject Prospects for South-east Asia in the third quarter. Significance Low consumer confidence has delayed an anticipated recovery in private consumption, while few countries have taken advantage of lower oil prices to boost spending. With global conditions likely to remain difficult in the third quarter, business will seek a stronger lead from domestic policies.

Symmetric and asymmetric adjustment of bank deposit interest rates: empirical evidence from Kenya

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Moses Nzuki Nyangu ◽  
Freshia Wangari Waweru ◽  
Nyankomo Marwa
Keyword(s):  
Monetary Policy ◽  
Interest Rate ◽  
Interest Rates ◽  
Asymmetric Adjustment ◽  
Deposit Rate ◽  
Content Type ◽  
Long Run ◽  
Adjustment Speed ◽  
Short Run ◽  
Pass Through

PurposeThis paper examines the sluggish adjustment of deposit interest rate categories with response to policy rate changes in a developing economy.Design/methodology/approachSymmetric and asymmetric error correction models (ECMs) are employed to test the pass-through effect and adjustment speed of deposit rates when above or below their equilibrium levels.FindingsThe findings reveal an incomplete pass-through effect in both the short run and long run while mixed results of symmetric and asymmetric adjustment speed across the different deposit rate categories are observed. Collusive pricing arrangement behavior is supported by deposit rate categories that adjust more rigidly upwards than downwards, while negative customer reaction behavior is supported by deposit rate categories that adjust more rigidly downwards than upwards.Practical implicationsEven though the findings indicate an aspect of increased responsiveness over the period, the sluggish adjustment of deposit rates imply that monetary policy is still ineffective and not uniform across the different deposit rate categories.Originality/valueTo the best of the authors' knowledge, this is the first study to empirically examine both symmetric and asymmetric adjustment behavior of deposit interest rate categories in Kenya. The findings are key to policy makers as they provide insights on how long it takes to adjust different deposit rate categories to monetary policy decisions. In addition, the behavior of deposit rates partly explains why interest rates capping was imposed in Kenya in 2016.

Export diversification augurs well for Europe's growth

2015 ◽  
Keyword(s):  
Euro Area ◽  
Export Diversification ◽  
Content Type ◽  
Long Run ◽  
Area Growth ◽  
Growth Prospects

Subject The diversification and quality of European exports. Significance For all the gloom about Europe's economy, one fact stands out: the continent is a proficient exporter. This is not just true of Germany, the biggest exporter in Europe and the world's third-largest exporter overall. Half of the world's top-ten exporters are European. Impacts Export prowess suggests Europe's long-run growth prospects remain good. This finding is independent of the currency fortunes of individual members or the region. This supports a more bullish view on the euro-area growth prospects than currently foreseen.

Russia spillover, low oil price will challenge Astana

2015 ◽  
Keyword(s):  
Monetary Policy ◽  
Oil Prices ◽  
Oil Price ◽  
National Currency ◽  
Public Confidence ◽  
Content Type ◽  
Slowing Down ◽  
Ukrainian Crisis ◽  
Domestic Products ◽  
Global Growth

Significance The slowing down of Kazakhstan's economy continues against a background of slow global growth, the turbulent economic situation in Russia and low oil prices. Lower-than-projected oil prices will reduce budget revenues and forecasts; on January 16, Astana said it was revising its budgets for 2015-17 to mirror an average oil price of 50 dollars/barrel, as current budgets were based on 80 dollars/barrel. The blow will be softened by substantial reserves, which are expected to be used to stimulate the economy. Dwindling demand for commodities will negatively affect the profitability of Kazakhstan's major producers. The cumulative spillover from the Russian-Ukrainian crisis is substantial, although manageable at present. Impacts Further devaluation of the tenge would undermine public confidence in Kazakhstan's national currency. Increased dollarisation of Kazakhstan's economy will make regulation difficult by monetary policy. Ruble depreciation will put pressure on the tenge and promote replacement of domestic products with Russian imports.

Prospects for the global economy to end-2016

2016 ◽  
Keyword(s):  
Euro Area ◽  
Emerging Economies ◽  
Global Economy ◽  
Commodity Prices ◽  
Content Type ◽  
Area Growth ◽  
Recent Trends ◽  
Global Growth

Subject Prospects for the global economy to end-2016. Significance Global growth could accelerate in the second half of 2016. Some emerging economies are facing better conditions thanks to the weaker dollar and some rebound in commodity prices, while others remain in recession. US growth slowed in the first quarter, while Japan's government just avoided a relapse into recession. Euro-area growth is robust compared to its recent trends, but cannot be relied upon to provide much support for the rest of the global economy.

Mexican fiscal consolidation steady despite oil price

2015 ◽  
Keyword(s):  
Monetary Policy ◽  
Central Bank ◽  
Oil Prices ◽  
Oil Price ◽  
Fiscal Consolidation ◽  
Significant Drop ◽  
Content Type ◽  
The Government

Subject The outlook for fiscal consolidation. Significance The significant drop in oil prices should not derail the fiscal consolidation trajectory mapped by President Enrique Pena Nieto's administration, which envisages that the debt/GDP ratio should stabilise by 2017. The fiscal hole opened by reduced oil prices has been compensated with greater taxation income and one-off revenues. Impacts Defying expectations, the oil price plunge did not push the government into an overtly contractionary fiscal correction. An arguably much-needed simplification of the cumbersome taxation regime will not take place due to the government's pledge not to alter it. Loose monetary policy from the autonomous central bank has worked in tandem with the government's fiscal stance.

Excess euro-area liquidity raises bank lending risks

2019 ◽  
Keyword(s):  
Monetary Policy ◽  
Euro Area ◽  
Commercial Banks ◽  
Bank Lending ◽  
Domestic Demand ◽  
Basel Iii ◽  
Content Type ◽  
Reserve Requirements ◽  
Regulatory Standards ◽  
Excess Liquidity

Significance The ECB stopped purchasing bonds this month after running its asset purchase programme (APP) since March 2015. The APP flooded commercial banks with liquidity in excess of their minimum reserve requirements, which they could use to grant new loans. The ECB achieved its goal of increasing credit to the private sector, raising domestic demand and warding off price deflation, but commercial banks have kept large amounts of excess liquidity. Impacts Euro-area banks' average profitability has improved during the APP scheme, but less accommodating monetary policy may reverse this trend. The high prudential ratios the Basel III regulatory standards require should make euro-area banks more resilient to monetary tightening. The ECB's mopping up may pose difficulties to banks relying on excess liquidity to meet the Basel III coverage liquidity ratio.

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