ECB Made No Policy Changes this Month

March 7, 2013

The Governing Council of the European Central Bank discussed whether to cut its interest rates but chose not to do so.  New macroeconomic forecasts were unveiled and are compared below to the prior evolution of such projections, which are updated on a quarterly basis.  The growth forecast for 2013 and 2014 were each revised somewhat lower.  The outlook for inflation was mostly unchanged and continues to show inflation skewed to the low end of target and below.

  GDP 2013 GDP 2014 CPI 2013 CPI 2014
03/13 -0.9%/-0.1% 0.0%/2.0% +1.2/2.1% 0.6%/2.0%
12/12 -0.9%/0.3% +0.2/2.2% +1.1%/2.1% +0.6%/2.2%
09/12 -0.4%/1.4%   +1.3/2.5%  
06/12 0.0%/2.0%   +1.0%/2.2%  
03/12 0.0%/2.2%   +0.9%/2.3%  
12/11 +0.3/2.3%   +0.8/2.2%  


No startling revelations were made on economic trends and prospects.  A recent downtrend in inflation had been predicted, and price prospects are contained.  Expected inflation is well-anchored.  There are some signs of stabilization in the recession, but these are mostly limited to surveys rather than hard data.  A gradual recovery is still assumed but seen as unlikely to commence until the second half of this year.  Growth risks are skewed to the downside, while price risks are balanced.  Money growth is subdued, but there is less fragmentation in the market.  The early repayment of EUR 224.8 billion of 3-year LTRO liquidity is a sign of improved financial market health. 

Draghi remained a stickler on the need for continuing fiscal consolidation and structural reforms, as well as removing any wiggle room from the explicit rules under which OMT, the unlimited potential program of sovereign debt purchases.  The facility remains available, but governments must accept the rigid terms of its usage.  All in all, this was not a news-breaking monthly meeting at the ECB.

Copyright 2013, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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