ECB’s Draghi expected to unveil a huge new stimulus plan
ATED AN HOUR AGO
Purchasing Managers’ Indexes for Europe show a stabilization, albeit the weakness persists in the industrial space.
The question is if and when the spillover will happen to the service sector and to the labor market — especially in the larger economies like Germany and France.
Even though critics are getting louder and louder questioning the effectiveness of further easing,
Draghi is getting more and more vocal about weaker-than-expected inflation.
The European Central Bank (ECB) and its outgoing President Mario Draghi are caught in a “Catch 22”: The market is expecting so much stimulus on Thursday that it seems almost impossible to surprise on the upside.
The economy is showing further signs of weakness, the inflation rate is not picking up and the U.S.-China trade war has no real end in sight. So what will the ECB do?
“We still think that Mr Draghi will muster a sufficient majority in the Governing Council to push through a package that will include rate cuts as well as a restart of the asset purchase program,” Dirk Schumacher, an ECB watcher with Natixis, said in a note to clients.
“我们仍然认为，德拉吉将在欧洲央行管理委员会(Governing Council)获得足够的多数票，推动包括降息以及重启资产购买计划在内的一揽子计划的通过，”欧洲央行Natixis观察人士德克•舒马赫(Dirk Schumacher)在给客户的一份报告中表示。
The meeting comes as some ECB hawks in recent weeks have been trying to downplay the chances of a huge stimulus package.
“There is, judging from (the) latest comments coming out of the Governing Council, no clear consensus within the Governing Council regarding the size and scope of potential easing measures.”
Recent economic data is not suggesting anything particularly positive, although the leading indicators have somewhat stabilized. Purchasing Managers’ Indexes for Europe show a stabilization, albeit the weakness persists in the industrial space. The question is if and when the spillover will happen to the service sector and to the labor market — especially in the larger economies like Germany and France.
So given this huge expectation the ECB is dealing with, is there room for an upside surprise?
“Potential surprises could include an expansion of the QE (quantitative easing)-eligible universe to new asset classes (senior bank debt or equities), or more radical changes to QE parameters (removing capital keys),” said Frederik Ducrozet, who watches the ECB at Pictet in Geneva.
“The bar for such radical changes seems high, although we would rule out nothing in a more adverse scenario next year.”
In detail the ECB is expected to do the following:
Cut its deposit rate.
Re-launch monthly net asset purchases.
Strengthen its forward guidance by extending the horizon to keep rates at present or lower levels beyond the first half of 2020.
Introduce a tiering system for bank deposits.
Raise the self-imposed issuer limit for purchases of government bonds from 33% to 40%, or even 50%.
If that is what we get, it will probably be the most comprehensive package ever by the ECB and a sign that the central bank has changed under the new Chief Economist Philip Lane.
Even though critics are getting louder and louder questioning the effectiveness of further easing, Draghi — in his last few weeks as president — is getting more and more vocal about weaker-than-expected inflation.
“As you know, inflation expectations now have been at historical lows for some time. So we have to consider that. With the admission — and that’s again very important — with the admission that we don’t like this,” he said during the last press conference in July.
It’s likely he’s not much happier now.
France says it ‘cannot authorize’ Facebook’s libra project on European soil
PUBLISHED 2 HOURS AGOUPDATED AN HOUR AGO
France is taking aim at big U.S. tech firms again — this time in the direction of Facebook’s proposed cryptocurrency libra.
Speaking at an OECD conference in Paris Thursday, French Finance Minister Bruno Le Maire said libra would put the sovereignty of governments at risk.
“All these concerns around libra are serious. So I want to say this with a lot of clarity: In these conditions, we cannot authorize the development of libra on European soil,” Le Maire said, according to a translation by CNBC.
Le Maire has been an outspoken opponent of libra since Facebook unveiled the project in June. In addition to concerns the cryptocurrency could undermine the sovereignty of other nations’ currencies, he has highlighted issues with money laundering, terrorism financing and market dominance. Regulators around the world have echoed those fears.
In his remarks Thursday, Le Maire said he had spoken with ECB President Mario Draghi and Christine Lagarde, who will be the next chief of the central bank, about creating a “public digital currency.”
勒梅尔在周四的讲话中说，他已经与欧洲央行行长德拉吉(Mario Draghi)和下任行长拉加德(Christine Lagarde)就创建一种“公共数字货币”进行了讨论。
Unlike central bank-backed currencies, libra would be overseen by an independent nonprofit based in Switzerland called the Libra Association. Facebook, along with 27 other companies like PayPal, Visa and Mastercard, were founding members of the Libra Association. The goal of the project, Facebook says, is to enable fast, low-cost payments and money transfers for people around the world.
On Wednesday, the Libra Association said it will apply for a payments license in Switzerland, confirming the country will be home to its main supervisory authority.
France has taken a leading role regulating big technology companies in Europe, passing a 3% digital tax on a handful of U.S. firms like Facebook, Amazon and Google.
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