26 Nov 2014
To QE or to CE? - Rabobank
FXStreet (Barcelona) - Elwin de Groot, Senior Eurozone Strategist at Rabobank, notes qualitative or credit easing (CE) has played a dominant role in the ECB measures for repairing the mechanism that transfers ECB’s monetary policy to the private sector.
Key Quotes
“Qualitative or credit easing (CE) has played a dominant role in the ECB’s measures in recent years, because the focus in these measures is on the repair of the mechanism that transmits the ECB’s monetary policy to the private sector.”
“Although the ECB’s recent conventional and unconventional measures have pushed Euribor rates to a mere 8 basis points above the zero mark and sovereign spreads in the eurozone have returned to their pre-sovereign debt crisis levels, the evidence that the ECB’s credit easing approach is really working is clearly underwhelming.”
“Although borrowing costs for nonfinancial corporations and households in the periphery have been reduced somewhat in nominal terms, they certainly have not in real terms. Neither have they declined in terms of spreads vis-à-vis German companies’ and households’ borrowing costs.”
“The sobering conclusion is that even when we focus on the pure ‘pricing’ component (the rates charged on new loans), the impact of past and recent measures appears to be disappointing.”
“We would highlight the lack of growth as one of the stumbling blocks, especially when seen in a broader context of financial institutions still being focused on de-leveraging.”
“This, in turn, leads us to believe that if growth will continue to disappoint, the ECB will feel compelled to shift to more radical, quantity-oriented, policies.”
Key Quotes
“Qualitative or credit easing (CE) has played a dominant role in the ECB’s measures in recent years, because the focus in these measures is on the repair of the mechanism that transmits the ECB’s monetary policy to the private sector.”
“Although the ECB’s recent conventional and unconventional measures have pushed Euribor rates to a mere 8 basis points above the zero mark and sovereign spreads in the eurozone have returned to their pre-sovereign debt crisis levels, the evidence that the ECB’s credit easing approach is really working is clearly underwhelming.”
“Although borrowing costs for nonfinancial corporations and households in the periphery have been reduced somewhat in nominal terms, they certainly have not in real terms. Neither have they declined in terms of spreads vis-à-vis German companies’ and households’ borrowing costs.”
“The sobering conclusion is that even when we focus on the pure ‘pricing’ component (the rates charged on new loans), the impact of past and recent measures appears to be disappointing.”
“We would highlight the lack of growth as one of the stumbling blocks, especially when seen in a broader context of financial institutions still being focused on de-leveraging.”
“This, in turn, leads us to believe that if growth will continue to disappoint, the ECB will feel compelled to shift to more radical, quantity-oriented, policies.”