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23 Jan 2015
ECB bond buying and falling oil prices might boost Euro area real activity– GS
FXStreet (Barcelona) - According to Goldman Sachs, the ECB bond buying will aid a lower exchange rate, and when combined with lower oil prices, will help boost the Euro area real activity.
Key Quotes
“While the fall in the oil price has intensified near-term deflation risks, it has delivered something similar to a tax cut, by increasing disposable incomes. We expect this to boost Euro area real activity. Accordingly, last week we revised our area-wide real GDP forecasts up by 0.5% over the next two years.”
“We expect ECB sovereign purchases to weaken the exchange rate, supporting real activity and prices. Whether the ECB will succeed in raising medium-term inflation expectations is, at this stage, less clear. But if the ‘dragging anchor’ of falling inflation expectations is reversed, then the ECB’s expansionary policies, together with lower oil prices, will improve the Euro area outlook.”
Key Quotes
“While the fall in the oil price has intensified near-term deflation risks, it has delivered something similar to a tax cut, by increasing disposable incomes. We expect this to boost Euro area real activity. Accordingly, last week we revised our area-wide real GDP forecasts up by 0.5% over the next two years.”
“We expect ECB sovereign purchases to weaken the exchange rate, supporting real activity and prices. Whether the ECB will succeed in raising medium-term inflation expectations is, at this stage, less clear. But if the ‘dragging anchor’ of falling inflation expectations is reversed, then the ECB’s expansionary policies, together with lower oil prices, will improve the Euro area outlook.”