Sandra Holdsworth, fixed income manager at Kames Capital, comments on the European Central Bank’s (ECB) latest monetary policy decision…
Today the European Central Bank (ECB) held its regular Governing Council meeting to discuss monetary policy. Monetary Policy was not changed and in the accompanying statement the ECB remained reasonably optimistic regarding the prospects for economic growth and inflation, accompanied by the usual exhortation to national governments to step up their structural reform efforts.
The press conference Q&A was more dramatic: in response to a question on Greece, ECB President Draghi announced that it had approved a request from the Central Bank of Greece to increase the size of the Emergency Lending Authority (ELA) by EUR900 million. This move will be welcomed in Greece as it may be possible now to loosen very slightly some of the capital controls on the Greek banking system or, at the very least, enable the banks to refill their cashpoints.
There is still some way to go before the Greek government will be comfortable in removing all capital controls: a full agreement with the European Stability Mechanism (ESM) will have to be negotiated and signed, some Eurozone partners will have to vote in national parliaments and, not least, the Greek government will have to pass some further legislation. This move is the first small step on the path to improvement in economic conditions in Greece.
