Euro zone is recovering from Brexit, while the British economy is shrinking at its fastest rate since the 2008 crisis. Jens Weidmann shared his view of ultra-loose monetary policy being less and less effective in the future. So, no more ECB easing post Brexit?
4 August, AtoZForex – Bundesbank President Jens Weidmann said in his interview this Thursday, that the decision of the UK to divorce the European Union will not create fundamental changes in the outlook for the Euro zone and elaborated why there will be no more ECB easing post Brexit.
Why there will be no more ECB easing post Brexit?
The Head of the Central Bank of Germany who is also a member of the Governing Council of the European Central Bank, Jens Weidmann shared his impression on Brexit. He stated in his interview that the decision to leave the EU will not make a fundamental impact on the Euro zone’s economic outlook:
“There may well be a small damper, but in general, the upward trend will continue.”
Mr. Weidmann also added that it was too early to produce any reliable forecasts for what this might bring to the future price developments. Moreover, he repeated his view on the ECB-easing. He thinks the overall effectiveness of ultra-loose monetary policy will go down over the period of time, while the risks and side-effects will increase.
“But once again: uncertainty is currently pronounced and we need to first wait bit by bit for detailed economic indicators in order to be better able to assess the consequences of the Brexit vote.”
The global economic outlook has become more uncertain after the Brexit vote. After a spike in volatility around the UK EU Referendum, the markets have more or less stabilized returning to a relative calm. However, the economists warn that full economic impact of the Brexit is only yet to come. In its regular economic bulletin, the European Central Bank acknowledged:
“<…> Uncertainty about the global outlook has increased, while incoming data for the second quarter point to subdued global activity and trade.”
The surveys indicate that the UK’s economy is shrinking at its fastest rate since the financial crisis in 2008. The Bank of England is widely expected to cut the rates today. Meanwhile, The ECB confirmed on Thursday the expectation of “moderate recovery of the Euro zone’s economy post-Brexit.
See also: BoE rate cut fully priced in
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