the withdrawal of quantitative easing is on the agenda, Europe is not in recession- Corriere.it

the withdrawal of quantitative easing is on the agenda, Europe is not in recession- Corriere.it


The European economy is not in recession. She told ECB president Christine Lagarde during her speech at the meeting of the Institute of International Finance in Washington. In Europe there are many difficulties - she said - but there is also some good news. In the first place the euro area economy is not in recession and also in the last two quarters has produced positive numbers growth, although clearly slowing down, while in the US there was a contraction. In addition, the unemployment rate to a minimum and the labor participation rate returned to pre-Covid levels.

Monetary and fiscal policy

Lagarde then called for the collaboration of budgetary policy, whose measures after the aid rain of the pandemic must now focus on the most vulnerable. He then explained that not having a fiscal union, a union of markets and a complete banking union is not comforting, but that doesn't stop us from doing what we need to do, which is to strive to meet our price stability mandate. The solution for the president is clear: Central banks need to work together, adding that greater cooperation is needed between the bankers of the member states to understand what the setbacks and consequences of monetary policy decisions may be, because the markets are very integrated.

Say goodbye to quantitative easing?

During her speech, President Lagarde also announced that the European Central Bank has begun a discussion on quantitative tightening, meaning the withdrawal of bond purchases that will lead to the reduction of the central bank's securities portfolio. The program was stopped as regards net purchases - Lagarde recalled - and the discussion on when it should be withdrawn, at what pace and with what time horizon it started and will continue. That would mean us renounce quantitative easing, an unconventional monetary policy tool used by the ECB but also by the national central banks to stimulate economic, productive and employment growth, support public debt and contain inflation. It consists of creating new money, injecting it into the financial and economic system for the purchase of securities and thus increasing the confidence of market participants by promoting liquidity and loans. Despite the current absence of "new" purchases, the ECB intends to continue to reinvest the bonds it has in its portfolio (keeping it unchanged) until the end of 2024, ie for an extended period of time after the date on which it began to raise the reference interest rates and in any case, as long as it is necessary to maintain conditions of abundant liquidity and an adequate stance of monetary policy, Lagarde reiterated. A position that several governors are attacking, favoring an early exit, in the face of inflation now close to 10%.

The Fed's monetary policy

Several economists are blaming the Fed's monetary policy, which by forcing other major central banks to keep pace with rate hikes risks exacerbating difficulties in sustaining growth and keeping debt at bay. On the one hand, the ECB has raised rates in the eurozone to 1.25%, on the other hand, in the US, the Fed has already raised them in the range of between 3 and 3.25% and has signaled its intention to proceed with decision on the road of the causewaysi to curb inflation, even at the cost of causing a marked slowdown in the economy. In the face of the many threats facing the world, from the invasion of Ukraine to the energy crisis, Lagarde also stressed the importance of close cooperation between monetary and fiscal policy.

Bags down, Milan the worst

His words were appreciated by the European stock exchanges, which, following the intervention, closed reducing the decline: the Stoxx 600 area index fell 1.55%. Sales in London (-0.90%), with the domestic political situation and GDP falling, Milan (-1.27%), Paris (-0.25%) and Frankfurt (-0.37%) and Madrid (-1.30%). At Piazza Affari stop and go for Mps. The stock suspended in the volatility auction with a theoretical rise of 14.9%.



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