EU governments are not matching the ECB's efforts
EU fiscal response to the crisis is inadequate
Not opposed to increasing PEPP size, but decision should be based on data
No urgency to increase purchases, must examine how easing of lockdown measures are impacting the economy
CNBC reports that according to Deputy Governor for Monetary Policy Ben Broadbent, the U.K. may be headed toward negative interest rates at impending Bank of England monetary policy meetings.
The BOE's Monetary Policy Committee (MPC) voted to hold interest rates at a historic low of 0.1% last Thursday, having cut rates twice from 0.75% since the start of the coronavirus pandemic.
"The committee are certainly prepared to do what is necessary to meet our remit with risks still to the downside," Broadbent told CNBC on Tuesday.
"Yes, it is quite possible that more monetary easing will be needed at the time."
Along with the two previous rate cuts, the Bank has also announced £200 billion of new quantitative easing, bringing its bond buying program to a total of £645 billion.
ECB measures form a powerful package
Rating downgrades may be a risk to policy discussion
ECB has not discussed impact of rating downgrades on purchases
We will continue to come up with appropriate responses
BOE is clearly committed to take action when needed
Appropriate that BOE continues with aggressive pace of QE for the moment
We will take stock of that, there's still another meeting before QE completion
Information about lifting lockdown measures will be material to June discussions
ECB constantly monitoring the situation
ECB policy has provided crucial support to the economy
Inflation will likely fall further in the next few months
PEPP helping to forestall undue tightening of financial conditions
Fiscal actions are the first line of defense
The Bank of England's Monetary Policy Committee (MPC) sets monetary policy to meet the 2% inflation target, and in a way that helps to sustain growth and employment. In that context, its challenge is to respond to the severe economic and financial disruption caused by the spread of Covid-19.
At its meeting ending on 6 May 2020, the MPC voted unanimously to maintain Bank Rate at 0.1%.
The Committee voted by a majority of 7-2 for the Bank of England to continue with the programme of £200 billion of UK government bond and sterling non-financial investment-grade corporate bond purchases, financed by the issuance of central bank reserves, to take the total stock of these purchases to £645 billion.
Two members preferred to increase the target for the stock of asset purchases by an additional £100 billion at this meeting.
The spread of Covid-19 and the measures to contain it are having a significant impact on the United Kingdom and many countries around the world.
Activity has fallen sharply since the beginning of the year and unemployment has risen markedly.
Economic data have continued to be consistent with a sudden and very marked drop in global activity.
Oil prices have been volatile.
There have, however, been tentative signs of recovery in domestic spending in China, and this is likely to be echoed in other countries that have started to relax Covid-related restrictions on economic activity.
Financial markets have recovered somewhat over recent weeks and risky asset prices have picked up from their lows in mid-March. This in part reflects the actions taken by authorities in the United Kingdom and elsewhere. Global financial conditions have, nevertheless, remained tighter than prior to the outbreak of Covid-19.
The timeliest indicators of UK demand have generally stabilised at very low levels in recent weeks, after unprecedented falls during late March and early April.
Payments data point to a reduction in the level of household consumption of around 30%.
Consumer confidence has declined markedly and housing market activity has practically ceased.
CPI inflation declined to 1.5% in March and is likely to fall below 1% in the next few months, in large part reflecting developments in energy prices.
ECB needs to discuss how to offer certainty to the court
ECB hasn't yet discussed whether to buy junk bonds
Germany is in a severe economic recession
Economy can recovery sustainably once the pandemic has been overcome
Should not lose sight of eventual exit from stimulus measures
2020 GDP growth forecast -5.5% (previously +1.1%)
2021 GDP growth forecast +4.3% (previously +1.2%)
2022 GDP growth forecast +1.7% (previously +1.4%)
2020 inflation forecast +0.4% (previously +1.2%)
2021 inflation forecast +1.2% (previously +1.4%)
2022 inflation forecast +1.4% (previously +1.5%)
Euro area real GDP could fall by around 5% (mild scenario), 8% (medium scenario), and 12% (severe scenario) this year
Under the severe scenario, Q2 quarterly real GDP growth could be -15%, followed by a protracted and incomplete recovery; +6% in Q3, +3% in Q4
Under the severe scenario, real GDP is expected to remain well below the level observed at the end of 2019 until the end of 2022
BOJ will ease further without hesitation if needed
Expects impact of the virus outbreak to weaken in 2H 2020
Risks are tilted to the downside
Once the virus is contained, the economy will start recovering
Uncertainty is high with regards to the timing on when the virus outbreak will end
There is no change in the BOJ's stance to achieve 2% price target
Price momentum has been lost for now
Prices are unlikely to meet 2% target during forecast period
Expects monetary easing to have synergy with government's fiscal policy
Bloomberg reports that Bundesbank President Jens Weidmann praised euro-area governments for providing "significant, impressive" spending in the fight against the coronavirus, but warned that they'll need to tighten their budgets once the emergency has passed.
The German central banker told Bloomberg in an interview by email that the economy will need broad support for some time. He also argued that "the pandemic plainly shows how important a solid fiscal policy is."
"An extremely expansionary fiscal stance cannot be sustained permanently," he said. "Going forward, then, all countries will have to focus on reducing the very high debt ratios and ensuring acceptance in the capital markets, and to do this in a way that is compatible with our fiscal rules."
The comments strike at the heart of the debate over how Europe should handle the aftermath of the coronavirus, with governments across the 19-nation bloc pledging hundreds of billions of euros to support small businesses and compensate for lost wages.
"It is not yet possible to say for sure whether the measures taken to date will be enough," said Weidmannl. "Monetary policy is making a major and important contribution within the scope of its mandate, and will continue to play its role."
Doesn't expect a V-shaped recovery
Expects something more like negative quarters of growth this year, then gradual return to positive growth next year
It will take time for governments to lift restrictions and people to regain confidence
Uncertainty is the central issue surrounding the economy's future
Fed is committed to near-zero rates until after the crisis passes
Until price pressures move higher and unemployment data reverse its course
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