In view of the prospect of US taxes on steel and aluminium, the European Central Bank (ECB) has joined the international voices warning the US government against making any hasty protectionist decisions that could derail the current robust levels of economic growth.
“We are convinced that disputes should be resolved in a multilateral framework. Unilateral decisions are dangerous”, said the President of the European institution, Mario Draghi, on Thursday 8 March. “If you put tariffs on your allies, one wonders who the enemies are?”, he said, expressing concern at possible negative repercussions on monetary exchange rates and, more generally, on the confidence of economic actors. He also warned against financial deregulation, a phenomenon that exists but is less talked about, but contributed to the financial crisis of 2018.
Draghi reiterated the ECB's analysis that robust economic growth is developing at a faster rate than anticipated, even though, he argues, a high degree of monetary stimulus is still necessary.
On Thursday, the ECB increased its growth forecast for 2018, setting it at 2.4%, but making no changes to its forecasts for 2019 (1.9%) and 2020 (1.7%).
On the other hand, the inflation forecasts have been reduced for 2018, to the level of 1.2%, but remain unchanged for 2019 (1.5%) and 2020 (1.7%). Draghi explains that the increase of prices on an annual basis will remain at 1.5% for the remainder of 2018.
QE. Maintaining a sustained growth trajectory has allowed the ECB to tone down its language concerning the programme for the mass buyback of mainly public securities ('quantitative easing' or QE). The Governing Council has unanimously agreed to remove a sentence from these declarations referring to an increase in the monthly rate of securities purchases in the framework of QE. However, it is too soon to declare a victory, Draghi said, as the ECB remains ready to continue the operation for as long as necessary.
Declining to interpret the results of the Italian elections, Draghi reiterated that the euro was “irreversible” and called for a deepening of EMU through such things as completing the Banking Union.
In a very rare move, the ECB has decided to ask the opinion of the Court of Justice of the EU concerning the compatibility with EU law of the suspension, by the Latvian authorities, of the Governor of the Central Bank, Ilmārs Rimšēvičs.
Reiterating that as single banking supervisor in the Eurozone, the ECB has no powers of investigation, Draghi called for better coordination between the competent authorities at national and European levels, to be made official within a forum, or an ad hoc authority.
As for the award of emergency liquidity (ELA) to the Latvian bank ABLV, which has been accused of money laundering, he reiterated that the competence for such matters should be centralised at ECB level.
On Thursday, the monetary institute decided to keep the main interest rates unchanged at 0.00% for principal refinancing operations, 0.25% for the marginal lending facility and -0.4% for the deposit facility beyond the end of the QE programme. (Original version in French by Mathieu Bion)