• 2020-07-10 07:30

    By Greg Quinn

    (MNI) - Governments must keep fiscal stimulus going through the recovery from the Covid-19 pandemic, while making hard choices about ending support for industries like airlines and fossil fuels facing a long-term reduction in demand, the IMF said Friday.

    "Fiscal policy will need to remain supportive and flexible until a safe and durable exit from the crisis is secured," Fiscal Affairs Director Vitor Gaspar and Research Director Gita Gopinath wrote in a blog post.

    "It will be necessary to facilitate the transfer of resources from sectors that may permanently shrink, such as air travel, to sectors that will be expanding, such as digital services. Support should move from maintaining jobs to supporting people as they retrain or relocate across sectors.

  • 2020-07-02 10:56

    By Luke Heighton

    FRANKFURT (MNI) - Government efforts to counter the economic effects of the coronavirus pandemic must not be allowed to permanently alter the relationship between the state and private enterprise, the head of one of Germany's largest SME business associations told MNI in an interview, as he voiced concern that red tape might drag down growth.

    "A crisis is a time that transfers decision-making power to the government," Ludwig Veltmann, CEO of the Mittelstandsverbund, told MNI. "The danger is that if you are not careful it remains there, it becomes a sort of automatism.

  • 2020-07-01 09:09

    -Haskel: Risks To Downside Of BOE Economic Scenario

    LONDON (MNI) - The UK's economic balance of risks are currently to the downside, but policy remains appropriate, Bank of England Monetary Policy Committee member Jonathan Haskell said Wednesday, noting that the BOE was looking into the fragmented pass through from its recent cutting of benchmark rates to 0.1%.

    "I believe the current stance of monetary policy is appropriate but, on balance, risks are to the downside," he said.

    He said that if there was a second Covid wave the Bank would respond to the economic consequences but that it had already built consumer caution, in part due to health fears, into its latest projections.

    Haskel said that at the June meeting he "readily joined the majority of

  • 2020-07-01 04:32

    By Luke Heighton

    FRANKFURT (MNI) - Europe's failure to act with greater unity to the economic threat posed by the Covid-19 pandemic means it faces a two-speed recovery, European Central Bank vice president Luis de Guindos said in an interview Wednesday, with a second wave of infections now a "distinct possibility."

    The eurozone has begun to see a recovery in activity, de Guindos told La Stampa, with indicators pointing towards a rebound in a number of countries. However many "unknowns and question marks remain," he said.

  • 2020-06-29 11:42

    --BOE's Vlieghe-Fiscal Consolidation Would Depress Real Interest Rates Further

    LONDON (MNI) - The real equilibrium interest rate may have fallen and could head lower still, Bank of England Monetary Policy Committee member Gertjan Vlieghe said on Monday.

    Vlieghe's comments imply that the Monetary Policy Committee, even when it gets round to tightening, may not have to hike to hit the equilibrium, and he warned that fiscal consolidation following the Covid-19 hit could push down on real rates, as could increased income and wealth disparities.

    In a question-and-answer session following a University of York event Vlieghe said fiscal consolidation was more likely to weigh on growth in demand and consumption, and "would depress real rates relative to the situ

  • 2020-06-25 12:24

    By Luke Heighton

    FRANKFURT (MNI) - The Governing Council of the European Central Bank was unanimous in acknowledging the need for further action to support Europe's economy through the Covid-19, the official account of the June monetary policy meeting shows, though there was disagreement over the timing and the size of the Pandemic Emergency Purchasing Programme's expansion.

    "All members agreed that further monetary policy action was needed, in accordance with the Governing Council's price stability objective," the account said.

  • 2020-06-24 09:00

    By Greg Quinn

    WASHINGTON (MNI) - The IMF reduced its 2020 global GDP forecast to -4.9% from -3% and said every region will contract for the first time ever as the Covid-19 pandemic continues adding damage to the deepest slump since the Great Depression.

    Output next year will only recover to around 2019 levels or 6.5pp less than what the IMF expected at the start of this year, according to a report Wednesday. Consumption has fallen far more than in other recessions, investment has tumbled, and a "catastrophic hit to the global labor market" will hobble the recovery.

    "Downside risks, however, remain significant," the Washington-based fund said, including a second wave of the virus that could reduce GDP another 4.9pp next year.

  • 2020-06-24 04:43

    By Luke Heighton

    FRANKFURT (MNI) - Longer-term sovereign yields have become "virtually unresponsive" to short-term interest rate cuts, European Central Bank chief economist Philip Lane said Wednesday, making asset purchases a more effective tool under the stressed market conditions caused by the Covid-19 crisis.

    "While we stand ready to cut policy rates in the future as market conditions normalise and if warranted by the medium-term inflation outlook, this evidence tilts the balance towards asset purchases as the more efficient tool in current circumstances," Lane told a Financial Center Breakfast Webinar.

    Lane cautioned against placing too much confidence in recent data suggesting a swift economic rebound as Europe slowly emerges from lockdown, since the scale of the co

  • 2020-06-23 10:57

    By Luke Heighton

    FRANKFURT (MNI) - it is too early to discuss the creation of a eurozone bad bank, and hopefully it will not be necessary, the chair of the European Central Bank's single supervisory board said in an interview published Tuesday, saying an increase in nonperforming loans was "inevitable" as a result of the Covid-19 crisis.

    Europe's banking system has held up well so far, he continued, but a second wave of infections requiring a reintroduction of lockdown conditions would have "far greater repercussions on banks' balance sheets," while low profitability will increase as a result of the severe recession," Andrea Enria told Il Sole 24 Ore

    While it was difficult to predict the level to which NPLs are likely to increase, it is inevitable the situation will dete

  • 2020-06-22 10:04

    By Luke Heighton

    FRANKFURT (MNI) - The European Central Bank's EUR750 billion pandemic emergency purchase programme will eventually converge upon the capital key meant to serve as a guide for its purchases of different nations' securities, vice president Luis De Guindos said Monday.

    The ECB will use the full flexibility PEPP offers for as long as necessary, De Guindos said, but "in the end there will be a reckoning.