The 5 year inflation rate dropped to 2% in the Eurozone for a 5 years swap and is being disorientated and disanchored; langusihing at its lows Draghi has to have his eggs balanced with unconventional measured monetary policy to re-activate the transmission to conventional monetary policy with little success of injecting cheap and easier moneys into the real economy. Disinflation and deflation looming hard on his heels. The ECB balance sheet has to be steered towards the 3.1 trillion with and added 1 trillion to boost the zone and it is a tall order for him. With only 400 billion introduced, is there still enuf demand for it to have another 600 billion credit consumption to ward off deflation? Low interest rate differentials doesnt help banks to engage carry trades which will put more pressure on ABS and covered bonds to deliver over its previous amount of 76.4 billion contribution. Are these unconventional measures of pull and push factors going to work? European banks are neither helping out nor biting Draghis attempts. Non-financial entities are paying down their debts despite of the low interest rate regime available and this worsen the take ups; confirming monetary policies does not work when there are no borrowers. Perhaps fiscal policy helps. 5% savings of Eurozone GDP by the paring down of loans would contribute more savings to Eurobanks and that would leave entirely to the sovereign govts as borrowers. Draghi is ignorant of this point; now opting for fiscal policies to be adopted by Euro govts......and I think I should be his advisor..................LOL and of course paying me in Pounds not EUR
Posted on: Sat, 22 Nov 2014 08:26:52 +0000