ECB

The ECB is making several adjustments to its monetary policy framework. However, the changes are not a departure from the current system of excess liquidity.

Monetary policy expert Volker Wieland believes that the current interest rate level in the eurozone is not particularly restrictive. Therefore, there is much to suggest that key interest rates will not be lowered before June.

When considering interest rate cuts, the ECB should not look too closely at its own forecasts for inflation and economic growth. There are several reasons for this.

The ECB bases its monetary policy on the economic data for the entire eurozone. The situation sometimes differs significantly depending on the euro country. This poses a problem for the central bank.

The uncertainty is high about how inflation and the economic situation of the Eurozone will develop in the coming months. Accordingly, the advice from economists to the ECB varies quite a bit, as a survey by Börsen-Zeitung shows.

There is concern that the ECB may lower interest rates too late in light of the successes in reducing inflation. Even though the ECB must be aware of this risk, it should by no means give in to market expectations of an interest rate cut by April.

The debate about the ECB‘s future course is gaining momentum - on the markets and among economists, but also among the euro central bankers themselves. In an interview, ECB Governing Council member Olli Rehn speaks plainly about the current situation and the outlook.

According to François Villeroy de Galhau, Governor of the Banque de France and Member of the Governing Council of the ECB, the European Central Bank should retain the great flexibility of the emergency bond purchase program PEPP as far as possible beyond its planned end in March 2022.