Euro-area quantitative easing extension gets closer

2015 ◽  
Keyword(s):  
Euro Area ◽  
Quantitative Easing ◽  
Content Type

Headline EURO-AREA: Quantitative easing extension gets closer

Even gradual quantitative tightening raises GDP risks

2019 ◽  
Keyword(s):  
Euro Area ◽  
Commercial Banks ◽  
Large Scale ◽  
Sales Tax ◽  
Quantitative Easing ◽  
Content Type ◽  
Balance Sheets ◽  
Liquidity Provision ◽  
The Us ◽  
Repurchase Agreements

Subject Quantitative easing and GDP. Significance The US Federal Reserve (Fed), Bank of Japan (BoJ) and ECB have all conducted quantitative easing (QE) programmes since 2008, purchasing assets from commercial banks on a large scale and without predefined repurchase agreements. These purchases have swollen the balance sheets of the three largest central banks and provided commercial banks with large liquidity buffers. Impacts The pace of the Fed withdrawing liquidity may slow; if US-China conflict worsens or another shock occurs, the Fed may consider reversing. In the euro-area, there are no new liquidity provisions, at a time when German GDP is weakening and Brexit threatens EU growth. New liquidity-provision plans may be hard for the euro-area to agree; if this is off the table, so are liquidity-withdrawing measures. The BoJ may stop scaling back its bond and ETF holdings if markets suffer; the upcoming sales tax rise will also hit spending.

SNB move will accentuate bond-equity divergence

2015 ◽  
Keyword(s):  
Euro Area ◽  
Yield Curve ◽  
Equity Markets ◽  
Bond Markets ◽  
Quantitative Easing ◽  
Bond Yields ◽  
Content Type ◽  
Sovereign Bond ◽  
Advanced Economies ◽  
The Us

Significance The move mainly aims to pre-empt the widely anticipated launch of a sovereign quantitative easing (QE) programme by the ECB on January 22. However, it will accentuate divergences between bond and equity markets. Sovereign bond yields for most advanced economies are falling to new lows and are increasingly negative at the shorter end of the yield curve, because of deflation fears and lacklustre growth outlooks. Yet equity markets are hovering near record highs, buoyed by the US recovery and expectations of further monetary stimulus in the euro-area. Impacts Bond markets will be driven by deflation fears, while equity markets, especially US stocks, will be buoyed by Goldilocks-type conditions. Market expectations that the ECB will launch a sovereign QE programme will make bond yields fall further. Bond yields will be suppressed by investor scepticism about the ECB's ability to reflate the euro-area economy.

Strong data increase pressure on ECB to wind down QE

2017 ◽  
Keyword(s):  
Euro Area ◽  
European Central Bank ◽  
Oil Price ◽  
Consumer Confidence ◽  
Quantitative Easing ◽  
Content Type ◽  
Core Inflation ◽  
European Central ◽  
Asset Purchases ◽  
Japanese Yen

Subject Outlook for euro-area uantitative easing. Significance Data released today by the European Commission showed business and consumer confidence rose to the highest in almost six years in February, further fuelling the debate over how quickly the European Central Bank (ECB) should wind down its two-year-old quantitative easing (QE) programme. Headline inflation rose to 1.8% year-on-year in January, the fastest in four years and just below the ECB’s 2.0% target. However, core inflation remains below 1.0%, justifying the continuation of the central bank’s asset purchases despite fierce resistance from Germany. Impacts The euro has fallen against the Japanese yen and the dollar this month because of rising concern about euro-area political risk. Fears of a sudden end to the 30-year bull market in bonds have eased; ten-year US yields are down over 20 basis points since mid-December. Further upside potential for the oil price is likely to be limited due to US shale and countries exempt from the OPEC cuts raising output. In this era of unconventional policy, the ECB could maintain QE to stabilise weaker members but raise rates to satisfy stronger ones.

Markets may misjudge risk of Greek exit from euro-area

2015 ◽  
Keyword(s):  
Euro Area ◽  
Ownership Structure ◽  
Public Debt ◽  
Focal Point ◽  
Quantitative Easing ◽  
Southern Europe ◽  
Bond Yields ◽  
German Government ◽  
Content Type ◽  
Private Investors

Significance While the scope for widespread contagion across Southern Europe is much more limited this time around because of the new ownership structure of Greece's public debt -- more than 80% of the stock is held by the official sector, in stark contrast to end-2011 when private investors held the bulk of Greek bonds -- a loss of confidence in the ECB's ability to implement a credible and effective programme of quantitative easing (QE) could increase investors' sensitivity to Greece's political woes. Impacts Despite Greece's re-emergence as a focal point for market anxiety, the bond yields of Portugal, Spain and Italy remain at near-record lows. This is partly due to market expectations of full-blown QE by the ECB. Yet Draghi must come up with a QE programme that is both credible and has the backing of a German government wary of further credit risk.

Strong Irish growth to generate political pressures

2015 ◽  
Keyword(s):  
Euro Area ◽  
Economic Performance ◽  
Quantitative Easing ◽  
Success Story ◽  
Economic Expansion ◽  
Content Type ◽  
Economic Stimulus ◽  
Nationalised Banks ◽  
The Government

Subject Ireland's economic prospects. Significance A number of underlying factors suggest that Ireland's recent economic performance is neither as strong nor as clearly the result of its bailout programme (as opposed to other factors) as might appear. Nevertheless, its impressive recent headline economic results have confirmed Ireland's status as the euro-area's bailout success story. Impacts The government -- and therefore taxpayers -- will continue to repay debt taken on to pay bondholders from nationalised banks. Chagrin about this burden is likely to make Ireland take a hard line against possible euro-area concessions to Greece. A weak euro and strong UK and US growth will continue to support Irish exports and economic expansion this year. The government anticipates significant economic stimulus from the ECB's sovereign quantitative easing programme.

The international strength of the euro will grow

2021 ◽  
Keyword(s):  
Euro Area ◽  
Financial Services ◽  
Raw Materials ◽  
Domestic Demand ◽  
Content Type ◽  
The Us ◽  
Us Dollar ◽  
Strategic Autonomy ◽  
Geopolitical Risks ◽  
The Eu

Significance The proposals identified areas where the euro could potentially become more dominant, such as the issuance of green bonds, digital currencies, and international trade in raw materials and energy. Ambitions to enhance the international leverage of the euro are being driven by the aim to strengthen EU strategic autonomy amid rising geopolitical risks. Impacts Developing its digital finance sector would be an opportunity for the EU to enhance its strategic autonomy in financial services. Challenging the US dollar would require the euro-area to rebalance its economy away from foreign to domestic demand. Member state division will prevent the economic reconfiguration the euro-area needed to make the euro a truly global currency.

EU bonds will rival German Bunds as a safe asset

2021 ◽  
Keyword(s):  
Euro Area ◽  
Safe Haven ◽  
Content Type ◽  
The World ◽  
The Creation ◽  
Over Time ◽  
The Eu

Significance This could create an alternative benchmark safe-haven asset to rival German Bunds within the region. As part of its issuance plans, the EU intends to issue at least EUR50bn in green bonds annually, which is likely to make it the world’s largest issuer of these bonds. Impacts The increased importance of EU bonds over time will help to support the euro's value and could eventually put pressure on the dollar. The EU is leading the world in green bond issuance, but the risk of spurious environmental claims (‘greenwashing’) must be managed. The creation of new EU bonds will help reduce the funding costs of riskier euro-area members such as Italy.

scholarly journals Liquidity, interest rates and house prices in the euro area: a DSGE analysis

2016 ◽  
Vol 9 (1) ◽  
pp. 4-25 ◽  
Author(s):  
Margarita Rubio ◽  
José A. Carrasco-Gallego
Keyword(s):  
Interest Rates ◽  
Monetary Union ◽  
Euro Area ◽  
House Prices ◽  
Housing Prices ◽  
House Price ◽  
Dsge Model ◽  
Content Type ◽  
The Core ◽  
Dynamic Stochastic

Purpose This study aims to build a two-country monetary union dynamic stochastic general equilibrium (DSGE) model with housing to assess how different shocks contributed to the increase in housing prices and credit in the European Economic and Monetary Union. One of the countries is calibrated to represent the core group in the euro area, while the other one corresponds to the periphery. Design/methodology/approach In this paper, the authors explore how a liquidity shock (or a decrease in the interest rate) affects house prices and the real economy through the asset price and the collateral channel. Then, they analyze how a house price shock in the periphery and a technology shock in the core countries are transmitted to both economies. Findings The authors find that a combination of an increase in liquidity in the euro area coming from the common monetary policy, together with asymmetric house price and technology shocks, contributed to an increase in house prices in the euro area and a stronger credit growth in the peripheral economies. Originality/value This paper represents the theoretical counterpart to empirical studies that show, through macroeconometric models, the interrelation between liquidity and other shocks with house prices. Using a DSGE model with housing, the authors disentangle the mechanisms behind these empirical findings.

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