ECB
was right in saying QE was working even before it began:
poll
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[April 10, 2015]
By Jonathan Cable
LONDON (Reuters) - The European Central
Bank was "about right" in claiming its trillion-euro quantitative easing
program was having a positive impact before it had even begun, according
to three quarters of economists polled by Reuters this week.
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Minutes from the Governing Council's March meeting showed members
"generally shared the assessment" that significant positive effects
from their latest policy decisions could already be seen.
Fifty-seven of 77 economists polled said they agreed. Two said the
ECB was too pessimistic. The other 18 said the Council was too
optimistic.
"There are clearly certain positive effects visible from QE, mainly
through a weaker euro and lower bond yields, which had, however,
already started to show beforehand," said Elmar Voelker at LBBW. "If
the ECB is mainly pointing to those anticipation effects, they may
be close to 'about right'."
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Having already slashed interest rates to zero as part of its battle
to spur growth and drive up inflation, the ECB announced in January
it planned to buy 60 billion euros of mainly government bonds per
month, starting in early March. It said it would aim to do so
through to September 2016.
Confirmation that QE was coming caused the euro and sovereign bond
yields to fall while stock markets have rallied -- Germany's DAX <.GDAXI>
is up around 25 percent and France's CAC <.FCHI> over 20 percent
this year -- and a lot of recent data have been surprisingly
positive.
And although consumer prices fell 0.1 percent in March year-on-year,
as expected, the decline was the smallest this year, official data
showed.
The ECB targets inflation at just below 2 percent, and with such a
long way to rise, 51 of 77 economists said program would last until
its planned completion date. Sixteen said it would be extended. Only
10 said it would finish early.
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"QE was working even before they bought a single bond. It will
vindicate them for what they are doing, but it won't blow them off
course," said Scotiabank's Alan Clarke. "If you renege on a promise
just a couple of months down the road, then you really shoot
yourself in the foot and the markets will never believe you again."
As the ECB hoovers up bonds, its balance sheet will naturally
expand. Median forecasts suggest it will be 1.08 trillion euros
bigger when the program ends than its current level of around 2.3
trillion.
ECB President Mario Draghi will hold a press conference after the
scheduled April 15 Governing Council meeting.
(Polling by Sarbani Haldar, Kailash Bathija and Aara Ramesh; Editing
by Ross Finley, Larry King)
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