The European Central Bank sets the tone.
The president of the European Central Bank (ECB) Mario Draghi foresees a healthier economic situation declaring “the inflation rate should stay under 2% for at least two years”.
For its first press conference of the year 2014 the ECB has shown a reassuring and determined image. The institution has confirmed its “forward guidance” political objective which is to maintain the rates to their lower level or to lower them down as long as possible. Keeping the prices stable remains the main target Frankfort, the objective is to keep the European inflation rate below 2%.
The ECB rate has been fixed at 0.25% for three months now and the institution is determined to protect the Eurozone from the risk of deflation; the correction of the inflation rate at 0.8% last month is nothing to be scared of for the Italian banker as he does not consider this element as being a factor of an increase of the prices declaring that “the risks are limited” and confirm that the inflation rate should stay under 2% for the next two years.
Adaptation of the European countries to this economic situation.
The French Chancellor of the Exchequer (Economic and Finances Minister) Pierre Moscovici has announced that the saving accounts rate would stay at 1.25% on the 1st of February despite the low rate of inflation of 0.7% which should have technically lowered the saving accounts rate down. This decision does not follow the argument of the French Governor of the Bank of France Christian Noyer who demonstrates that the rate could have been lowered to 0.75%. Mr Moscovici justifies this choice explaining that he wants to preserve the savers’ purchasing power; however with a rate at 1.25%the level of the remuneration is already at its lowest historical level.
On the other hand, the Bank of England (BEO) rate is at 0.5% while the inflation rate is at 2% and the quantitative Easing Asset Purchase Programme is at £375 bn until the 6th of February. It is the first time that inflation has been at or below the government-set target of 2% since November 2009 which was welcomed by the Prime Minister David Cameron.
For other European countries the economic situation is also getting better as it is for example for Spain who has known to refinance and invest in better conditions than last year and for Ireland who has recently made a remarkable comeback on the financial markets. This success is notably due to the “Forward Guidance” which has “finally found its way to the real economy” as underlined by Mario Draghi.
