Spyros, that is a good summary and an interesting take on the assessment. I also sense some scepticism about asset purchases. However, I am not sure whether that impression comes from the assessment itself or simply from the sense that “there ought to be” some. Isabel Schnabel has expressed some hesitations in speeches, but have any other Executive Board members indicated similar views?
Thank you Stefan. My impression is that Isabel has been the most vocal, certainly in the “hawkish” constituency. But there’s already been pushback from the other side. Villeroy de Galhau’s point a couple of days ago was that negative rates aren’t a good alternative and hence that QE is firmly in the toolkit. I suspect WE will forever be the bone of contention in the council given its fiscal and monetary-fiscal implications.
Without wishing to be unduly cynical, if I was from a country with a 6% budget deficit at the top of the cycle then I'd be in favor of as much QE as I could get.
Especially as I'd worked in multiple cabinet positions.
And if I was from a commercial banking background, I'd know from all my contacts and fellow enarques that negative rates hurt NIM because retail deposit rates can never go below zero (until they abolish notes) but the deposit rate can. Meanwhile, ECB research says QE is mildly positive for bank profits.
Yes, of course it will. There will always be those who are in favour more stimulus and those who think there has been far too much stimulus already. But of course, ECB decisions are decided by the “median governor” — or the centre of gravity in the governing council, as I prefer to put it. And it’s much less clear to me that “median governor” would be keen on QE now when the side effects are better understood and the alternatives are clearer.
I agree and that’s probably why it was reflected in the strategy in a fairly clear way. But I also think the strategy update fell short of an alternative, possibly due to lack of consensus.
Spyros, that is a good summary and an interesting take on the assessment. I also sense some scepticism about asset purchases. However, I am not sure whether that impression comes from the assessment itself or simply from the sense that “there ought to be” some. Isabel Schnabel has expressed some hesitations in speeches, but have any other Executive Board members indicated similar views?
Thank you Stefan. My impression is that Isabel has been the most vocal, certainly in the “hawkish” constituency. But there’s already been pushback from the other side. Villeroy de Galhau’s point a couple of days ago was that negative rates aren’t a good alternative and hence that QE is firmly in the toolkit. I suspect WE will forever be the bone of contention in the council given its fiscal and monetary-fiscal implications.
Without wishing to be unduly cynical, if I was from a country with a 6% budget deficit at the top of the cycle then I'd be in favor of as much QE as I could get.
Especially as I'd worked in multiple cabinet positions.
And if I was from a commercial banking background, I'd know from all my contacts and fellow enarques that negative rates hurt NIM because retail deposit rates can never go below zero (until they abolish notes) but the deposit rate can. Meanwhile, ECB research says QE is mildly positive for bank profits.
Yes, of course it will. There will always be those who are in favour more stimulus and those who think there has been far too much stimulus already. But of course, ECB decisions are decided by the “median governor” — or the centre of gravity in the governing council, as I prefer to put it. And it’s much less clear to me that “median governor” would be keen on QE now when the side effects are better understood and the alternatives are clearer.
I agree and that’s probably why it was reflected in the strategy in a fairly clear way. But I also think the strategy update fell short of an alternative, possibly due to lack of consensus.