European Central Bank policy of slowing the pace of exit

the European Central Bank 4, announced after the meeting to discuss interest rates continue to maintain 1% of the leading interest rates unchanged. Unexpected: the European Central Bank did not like the previous suggests, clearly gives out a timetable for the next step. In the United States Federal Reserve Board to adopt a new round of quantitative easing monetary policy, the European Central Bank also slowed down the pace of exit policies.

　　Europe Linkage

The Fed announced the launch of the second round of 3 quantitative easing monetary policy, said in the middle of next year before the re-acquisition of 600 billion U.S. dollars debt. This news came out, the rapid devaluation of U.S. dollar foreign exchange market, the euro against the dollar shot up all the way from 1 to 1.40 to 1 ratio of 1.42 or more. The Fed's move will undoubtedly become the European Central Bank decision on interest rates, an important consideration.

For the ECB, it is now too early to discuss interest rates. The current market concerns, first, when the European Central Bank loans to commercial banks to restart the tendering process, the second is to buy bonds when the exit program. Previously, a number of European Central Bank officials have said it will not rescue the long-term maintenance of the previous policy, suggesting that the policy will give out schedules. Late last month, the European Central Bank officials, Jurgen Stack says that the European Central Bank's emergency assistance policy will not delay the withdrawal.

European Central Bank President Jean-Claude Trichet 4, did not announce the withdrawal of the new policy content, but at a news conference, said, "next month" to decide whether to launch a new exit policy. The Fed's "rescue" action led to the sharp appreciation of the euro, the ECB has undoubtedly become the most important factors to consider. Early June of this year, the euro against the dollar is still a less than 1.20, nearly five months 20% of the euro exchange rate appreciation, which rely heavily on exports to the European economy is undoubtedly a heavy blow to the euro zone economy is likely to stifle the fragile recovery .

As a pillar of the European economy, Germany, 7-8 two months of consecutive decline in exports. German Engineering Federation President Thomas Lin Gardner warned last week, continued strength of the euro exchange rate will hit the price competitiveness of the manufacturing sector.

　　Way out

Argument from the previous view, in the exit policy, the ECB is clearly better than the Federal Reserve, Bank of England and Bank of Japan is more positive. Its current moderate economic growth in the euro area and the price level is satisfactory, it said it would gradually withdraw from the previously adopted emergency policies.

Currently, the European Central Bank is still to commercial banks within the euro zone interest rates to 1% of the 3-month unlimited offer, 1 month and 1 cycle of the central bank borrowings. The European financial markets are gradually returning to normal, 3-month euro area inter-bank lending rate from 0.63% in March rose to 1.049 percent, then if the ECB continues to provide the level of market interest rates lower than the unlimited credit, will no doubt affect the normal inter-bank lending. The market had expected, the European Central Bank will soon stop and the 3-month unlimited borrowing.

In May the European Central Bank began to plan the acquisition of government bonds, and no change in investor worries about the debt of individual countries. Greece, Ireland, Portugal, and Germany all the way to the spread ten-year bonds climbed, were now close to 840,500 and 390 basis points. Germany's central bank governor Axel Weber, European Central Bank should be to call an early end to debt acquisition, said the policy more harm than good.