{"id":63395,"date":"2014-11-10T00:52:21","date_gmt":"2014-11-10T05:52:21","guid":{"rendered":"http:\/\/countingpips.com\/?p=63395"},"modified":"2014-11-10T06:11:24","modified_gmt":"2014-11-10T11:11:24","slug":"monetary-policy-week-in-review-nov-3-7-2014-ecb-joins-fed-boe-boj-in-focusing-on-balance-sheet-growth","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2014\/11\/monetary-policy-week-in-review-nov-3-7-2014-ecb-joins-fed-boe-boj-in-focusing-on-balance-sheet-growth\/","title":{"rendered":"Monetary Policy Week in Review \u2013 Nov 3-7, 2014: ECB joins Fed, BOE, BOJ in focusing on balance sheet growth"},"content":{"rendered":"
November 10, 2014<\/div>
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By CentralBankNews.info<\/u><\/a>
\n    The fact that the 24 members of the European Central Bank\u2019s (ECB) governing council \u2013 including Germany – agree that further unconventional measures should be deployed if necessary to boost inflation, was clearly the main news in global monetary policy last week.
    Whatever differences were behind the ECB\u2019s split decision in September to cut rates and purchase asset-backed securities along with covered bonds have now been set aside.
    Although the ECB didn\u2019t expand its stimulus measures last week, its president, Mario Draghi, went to great lengths to emphasize to that the ECB\u2019s guidance and emphasis on expanding its balance sheet had been \u201csigned by the whole Governing Council unanimously.\u201d
    In his prepared statement, Draghi reiterated the guidance from recent months that the council was unanimous in its commitment to using additional unconventional instruments if necessary to address the risk of too prolonged a period of low inflation.
    But Draghi then went one major step further, saying the council had \u201ctasked ECB staff and the relevant Eurosystem committees with ensuring the timely preparation of further measures to be implemented, if needed.\u201d
    The implication is clearly that the ECB is preparing markets for further stimulus in December when a likely downward revision in its latest economic forecasts provides it with solid reasons.
    This mirrors the situation in September when the ECB cut its rate to essentially zero at 0.05 percent and embarked on quantitative easing (QE) by purchasing assets.
   In September, ECB staff cut its 2014 growth forecast to 0.9 percent from 1.0 percent and the 2015 forecast to 1.6 percent from 1.7 percent. The forecast for inflation this year was revised downward to 0.6 percent from a June forecast of 0.7 percent while the 2015 forecast was maintained at 1.1 percent.
    Since then, the European Commission has cut its 2014 growth forecast to 0.8 percent and the 2015 forecast to 1.1 percent. Euro area inflation in October was a mere 0.4 percent, well below the ECB’s objective of inflation that is just under 2 percent.
    In addition to the reality of the worsening outlook, it seems the ECB council has taken a hard look at how the use of QE has been associated with accelerating growth and rising inflation in the United States and the United Kingdom.
    While the balance sheets of the Federal Reserve and the Bank of England (BOE) have tripled or quadrupled in recent years, the ECB\u2019s balance sheet has contracted.
    The initial aim of the ECB\u2019s current asset purchases is to reverse this trend and boost it by around 1 billion euros so it returns to the level in March 2012 when it was 2.96 trillion euros.
    Next up for the ECB in December is likely to be a more ambitious target for expanding its balance sheet, either by purchasing sovereign bonds, supranational bonds or even corporate bonds, as the Bank of Japan (BOJ) has been doing.
   \u201cThe lessons from other countries and other jurisdictions are very important in the sense that they make us think about how to make the most of the measures we may be taking,\u201d Draghi said.<\/p>\n

 <\/span>   Through the first 45 weeks of this year<\/b>, the 90 central banks followed by Central Bank News have cut their policy rates 57 times, or 13.7 percent of this year\u2019s 417 policy decisions, up from 13.5 percent at the end of the third quarter and 12 percent at the end of the first half, and 12 percent at the end of the first quarter.<\/span><\/div>\n
    <\/span>Meanwhile, rates have been raised 42 times, or 10.0 percent of all policy decisions, slightly down from 10.2 percent at the end of September, but up from 9.3 percent at the end of June and 8.7 percent at the end of March. <\/span><\/div>\n
    Boosted by Malawi\u2019s 250 basis point rate rise, the Global Monetary Policy Rate – the average rate of the 90 central banks followed by Central Bank News \u2013 rose to 5.57 percent, up from 5.54 percent at the end of the third quarter and 5.53 percent at the end of the second quarter and first quarters.<\/span><\/div>\n
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LIST OF LAST WEEK\u2019S CENTRAL BANK DECISIONS<\/span><\/b>:<\/b><\/span><\/div>\n
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