ECB hawks rally against Draghi's farewell stimulus
Reuters
Published Sep 13, 2019 20:03
ECB hawks rally against Draghi's farewell stimulus
AMSTERDAM (Reuters) - Conservative policymakers slammed the European Central Bank's lavish stimulus measures on Friday, voicing doubts about the need and effectiveness of a package that could consume most of the bank's remaining firepower.
Facing a protracted growth slowdown, the ECB cut rates deeper into negative territory on Thursday and relaunched fresh bond purchases with no scheduled end-date, a move that divided the normally collegial Governing Council.
Although no vote was taken, sources with direct knowledge of the discussion said that over a third of policymakers opposed the fresh asset buys, pushed by outgoing ECB chief Mario Draghi, an unusually high number for a body that normally strives for consensus.
"This broad package of measures, in particular restarting the asset purchase programme, is disproportionate to the present economic conditions, and there are sound reasons to doubt its effectiveness," Dutch central bank chief Klaas Knot, a frequent critic of the bank's ultra-easy monetary policy, said.
While disagreements are frequent, ECB policymakers usually line up behind decisions and refrain from openly criticising its policy.
Bundesbank President Jens Weidmann, another key critic, also said the stimulus was excessive, and Thursday's decisions indicated that rates will stay low for a long time.
Germans have been especially irked by negative ECB rates and mass-selling newspaper Bild portrayed Draghi as "Count Draghila", a blood-sucking vampire, who is sucking dry the bank accounts of German savers.
Other dissenters on Thursday included French central bank governor Francois Villeroy de Galhau, ECB board member Benoit Coeure, also a Frenchman, German board member Sabine Lautenschlaeger and Estonian central bank chief Madis Müller, sources told Reuters.
While each policymaker gets one vote, the dissenters represented countries that account for more than half of the euro zone's gross domestic product (GDP).
Knot said the euro zone economy is running at full capacity, wages are increasing and that financing conditions are so easy that they do not impede the flow of credit.
"There are increasing signs of scarcity of low-risk assets, distorted pricing in financial markets and excessive risk-seeking behaviour in the housing markets," added Knot, a member of the ECB's policy-setting Governing Council.
Austrian central bank chief Robert Holzmann, meanwhile, said he was worried the ECB had made a mistake and that such a broad package should not have come before the bank's planned policy review, which could even see the inflation target of just below 2% lowered.
"This (review) is something I had hoped the bank should have been doing before making this decision," Holzmann told Bloomberg TV.
Get The App
"It may be that 2% (inflation) at the moment is out of reach and 1.5% also signifies stable prices, almost stable prices. So there is no need to ... use all the power you have in order to move up to 2% if the cost is too high," he added.
Written By: Reuters
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.