20 Jan 2015
How loose should the ECB monetary policy be? - BNP
FXStreet (Guatemala) - Analysts at BNP Paribas explained that through the use of a dynamic Taylor rule we detect how loose the ECB monetary policy stance should be.
"Our ECB reaction function, suggests that short-term interest rates should have to be negative and around 60-70bp below their current levels to properly address the current depressed economic environment."
"Such a short-term rate cut would imply a 30-40bp reduction in long-term (euro area weighted average) interest rates."
"Using as a rule of thumb empirical findings on the effects of QE conducted by the other major central banks, it emerges that purchases of sovereign debt securities of around EUR 500/600bn (i.e. 5-6% of GDP) would be in line with these results."
"Our ECB reaction function, suggests that short-term interest rates should have to be negative and around 60-70bp below their current levels to properly address the current depressed economic environment."
"Such a short-term rate cut would imply a 30-40bp reduction in long-term (euro area weighted average) interest rates."
"Using as a rule of thumb empirical findings on the effects of QE conducted by the other major central banks, it emerges that purchases of sovereign debt securities of around EUR 500/600bn (i.e. 5-6% of GDP) would be in line with these results."