Last week's meeting of the ECB Governing Council has exposed a secret that, in fact, has long been a mystery was not. The presence of a split in the leadership of the central bank on the purchases of sovereign bonds now indirectly confirmed by the president of the ECB, Mario Draghi, who said that to launch a full-fledged quantitative easing, it does not require unanimous support.
However, the decision to begin QE is still pending: to review the assets repurchased by the central bank on its balance sheet, will be in the first quarter of next year. In the meantime, opponents and supporters of purchases of government bonds still have one last chance to convince their opponents.
Opponents of quantitative easing, of course, insist that the eurozone has left behind the lowest point of the current business cycle, so that the situation will gradually improve. In support of his point of view, they can cause the growth of business sentiment in the German business community, which reflect the latest polls. And in the second economy of the region, France, where the indices of business activity remain depressed in November to the highest level since March 87 level items increased consumer confidence, which also gives hope for a broken situation for the better. Especially that the sharp drop in energy prices is going to be for the eurozone economy an additional growth driver.
"Trump" supporters QE - disappointingly weak inflation. Moreover, there are serious concerns that the progress in the eurozone November CPI index level + 0.3% y / y is not a "bottom", and the slowdown in prices will continue. I recall a leading indicator of price movements, as the producer price index (PPI), in October remained deep in negative territory, reaching the level of -1.3% y / y vs. -1.4% y / y in September (see chart). And the drop in oil prices, a generally favorable for the European economy, for inflation is palpable negative factor.
eurozone-ppi9-12-14
Eurozone producer price index,% y / y
The European Central Bank is required to maintain the level of consumer inflation near 2% y / y. It is becoming increasingly evident that without radical action by the regulator growth rate of prices for a long time can be considerably below target levels. At a press conference in the preceding Thursday Draghi has said that the ECB has no right to afford long-term deviation from fulfilling its mandate. In my opinion, before the end of winter, the historic decision to launch the European QE will still be accepted. Although it is unanimous, of course, will not. To the author Sergey Glushkov
