(Tiper Stock Exchange) – Isabel Schnabel, member of the Executive Board of the ECB, estimated that it will take over 6 years for the European Central Bank to reabsorb excess liquidity in the Eurozone. Even proceeding with the maneuver of quantitative tightening, which follows more than 8 years, on the contrary, of expansion “the size of our balance sheet will not return to the levels seen before the financial crisis”, he explained in a speech at Columbia University. This, continued Schnabel, because there are elements that are outside the check of the ECB itself: among these the consistency of the number of banknotes in circulation which has shown strong growth since 2007.
In the coming weeks before the Governing Council at the beginning of May, the ECB will carefully evaluate which are the effects on the monetary policy It is on bank credit of the recent phase of tension on the Stock Exchanges and on the banks, given that the banks of the Eurozone are “solid”, but these episodes may have repercussions in a restrictive sense. “Obviously we had these turbulence in recent weeks, we are taking them very seriously. The banks are very strong and we don’t have any kind of financial stability concerns at the moment, but obviously the situation is extremely fragile and we are monitoring the financial tensions very closely. We have also said that we are ready to give liquidity if necessary”.
“We should evaluate – explained Schnabel – fortunately we have some time before the next one meeting, especially on bank lending, if we see restrictions on the supply of credit and if it will have an impact on the transmission of monetary policy. And therefore also on perspectives Of inflation”. “Obviously it is something we should take into account on what we should be ahead. In this sense – he concluded – we will have to see if the economic forecasts still hold up with this tension”.
The member of the Executive Committee ensured that the quantitative tightening maneuver launched by the ECB has already had effects on short-term market rates, the institution has decided to move “very gradually” and now “the next move will decide what will happen starting from July”, after a reduction of the stock of titles at the rate of 15 billion euros per month.
“We have seen that so far the absorption capacity of the markets has been quite good. We have not seen market malfunctions the Quantitative tightening – he said – it is proceeding in a soft way”. “An important aspect to remember is that we consider interest rates as the main instrument for further tightening. Then we recently started “this quantitative tightening” and when we announced it, in December, we made it clear that how we do it will depend on three factors”. “The first is the general line of monetary policy, the second – he said – is the functioning of the market. The third is the ability to push rates up in the short term”.