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Rolling coverage from the World Economic Forum in Davos, and the ECB’s long-awaited decision on quantitative easing. Follow WEF live-stream here.
- Finnish PM rules out Greek deal
- Ray Dalio: ECB must deliver forceful QE
- Lagarde: US to raise rates in mid-2015
- The Agenda: Merkel, Lagarde, Gordon Brown…
- Davos: the complete guide
Mario Draghi’s press conference will be live-streamed here. 10 minutes to go.
Jonathan Loynes, chief European economist, gives some context ahead of the ECB press conference in Frankfurt (now less than 20 mins away).
Yesterday’s reports that the Governing Council has been considering purchases of €50bn per month, perhaps up to a total of €1trn, have raised expectations even further so that a programme of €500bn or less would now be a serious let-down.
Meanwhile, the positive impact even of a big programme could be diluted if, as mooted, the risks associated with the purchases remain with the national central banks, notionally eliminating “risk sharing”.
While we wait for the press conference to begin in Frankfurt at 13.30 (UK time), here is a reminder of what markets are expecting from ECB President Mario Draghi and his colleagues today:
Here’s the ECB announcement. Nothing on QE until the press conference. Everyone getting a bit nervous now pic.twitter.com/XQ1tc5V3cR
Here is the full statement from the ECB’s governing council on its rate decisions:
At today’s meeting the Governing Council of the ECB decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.05%, 0.30% and -0.20% respectively.
Further monetary policy measures will be communicated by the President of the ECB at a press conference starting at 2.30 p.m. CET today.
So the European Central Bank has given no clues on its planned QE programme in the initial policy statement. We will have to wait until the press conference at 13.30.
Here are the snaps from Reuters:
The ECB has left all key rates on hold. More soon.
Wait for it wait for it…
Markets keenly await the European Central Bank’s policy decision on quantitative easing. In less than five minutes we will get the initial policy statement – which may or may not give us detail on QE plans.
It might be that we have to wait until Mario Draghi’s press conference at 13.30 (UK time) for the full details.
Another flurry (but no shouting) in the Davos conference centre as Angela Merkel arrives.
She’s giving a keynote address in 45 minutes (2.15pm CET/1.15pm GMT).
Baroness Amos, UN undersecretary for humanitarian affairs and emergency relief, says the international community must learn lessons from the Ebola crisis which has hit some of the poorest parts of Africa – and also reached the UK and the US.
Jill Treanor reports:
Speaking at a panel to discuss the way pandemics are handed, Amos said that much more support was needed, better co-ordinated and more long-term approach taken.
“We should not be having to scramble around to raise money to put in place to set up the supply chains,” said Amos, who was sitting alongside the former head of UN Kofi Annan.
General Al-Sisi didn’t completely avoid media attention, though. After addressing Davos, Egypt’s president was whisked through the conference centre in a security throng.
Egypt’s General Al-Sisi just swept through the congress centre with a vast entourage in tow, orbited by cameras.
The Duke of York has arrived in Davos before his cocktail party this evening.
His public appearance comes as lawyers acting for the woman who alleges she was forced by a multimillionaire financier to have sex with Prince Andrew when she was 17, formally request that he respond under oath to her accusations.
Just grabbed a quick word with Enda Kenny, Ireland’s Taoiseach.
He warned Davos this morning that Europe faces a “chasm of disconnection” between its institutions and member states.
Al-Sisi’s claim that Egypt’s youth are its future is causing a stir on Twitter:
UK manufacturers are less optimistic about their export prospects, according to the latest quarterly CBI industrial trends survey.
Expectations for export order volumes fell to show a balance of +1, down from +9 in the last survey in October. In January total orders fell from +5 in December to +4. Output expectations dropped from +16 to +13, the lowest since October 2-13. CBI director of economics Rain Newton-Smith said:
Exports have grown modestly but there is a feeling that we will not see a repeat in the next quarter, with the eurozone still treading water and battling inflation.
MIXED BAG – UK CBI (Jan) Total Orders 4 v 5E v 5 prev; Selling Prices -6 v 7 prev; Business Optimism 15 v 8 prev #gbp
General al-Sisi didn’t have to defend Egypt’s human rights record:
Davos moderator Philipp Rosler did a great job moderating Sisi panel not asking him a single question about human rights crackdown. Bravo.
Also, great job Davos not opening the floor to questions for Sisi.
Egypt’s president al-Sisi just addressed Davos. He claimed a connection betweem uprisings in Egypt and the Unity March in Paris, and also declared:
“We are extremely serious about creating a democratic system in Egypt in which everyone can participate.”
President Sisi acknowledges how Egypt’s youth ‘lit the flame of the revolution’ . Some of them later imprisoned #WEF
Al Sisi says millions who demonstrated in France part of same movement as millions Egyptians who demonstrated v Muslim Brotherhood
Gen Al-Sisi introduced at Davos – a round of sycophantic applause breaks out.
Repulsive RT @gideonrachman Interviewer at Davos tells Al-Sisi, “the Davos community counts on your leadership”. More applause.
What can we expect and when from the ECB today?
At 12.45 (UK time) the central bank will issue a statement outlining the governing council’s decisions on key interest rates.
For all the facts and figures on Davos, read the Guardian’s briefing here. A taster of the delegate breakdown is shown in the charts below.
There is also a good spinning globe infographic on the WEF website here.
“Mario Draghi is not in Davos this year but is still managing to dominate events,” Larry Elliott, the Guardian’s Economics Editor, reports from the Swiss ski resort.
A few extracts from Larry’s blog below, but the full report can be found here.
All anybody wants to talk about today at the World Economic Forum is the European Central Bank and quantitative easing. How much? For how long? What concessions have been made to the Germans? Will it make any real difference to the enfeebled state of the eurozone?
After so many false dawns in the past, the prevailing mood is one of caution. There is very little sense among the business leaders or the policy chiefs that buying €50bn (£38bn) of sovereign bonds a month will do much good. Rather, the feeling is that not doing it could do even more damage to an economy already in deflation.
Here in Frankfurt ECB set to announce one of most important decisions ever, but most econ hacks are in Davos. Pesky non-refundable hotels…
As George Osborne attends the WEF in Davos today, the latest figures on the public finances show he has a lot more work to do on getting the deficit down.
The government borrowed £2.9bn more in December than a year earlier.
The government is banking on a flood of self-assessment tax receipts, relating to income earned in the fiscal year ending last April (which in turn reflected workers delaying income to take advantage of a cut in the higher rate of income tax), to improve the borrowing picture markedly.
It is worth remembering though that the first stab at January’s data by the statisticians will be particularly uncertain. Some self-assessment tax receipts are paid too late for the number crunchers to count in the data and will not be reflected until later on. That might mean January starts off disappointing but subsequently improves.
Finland will not be willing to consider renegotiating Greece’s debts if the left-wing Syriza party wins power, PM Alex Stubb declared to the Davos conference hall.
Asked about Sunday’s Greek elections, Stubb reiterated Finland’s hardline position on the issue, potentially drawing the battle lines with Alexis Tsipras, Syriza’s leader.
Ireland is back in the markets, Portugal is back in the markets. Greece is trying to get back.
We will deal with any democratically elected government Greece has. But it will be very hard for us to forgive any loans or restructure any debt at this moment.
Finland’s prime minister is putting a brave face on the prospect of a Eurozone QE package today.
Alex Stubb told Davos:
We firmly believe in the independence of the ECB. Whatever they do today, we will welcome with a smile.
Dutch PM Mark Rutte isn’t happy that some countries (France, perhaps?) are still debating whether to take tough decisions on their economy.
Europe needs to do a lot more to become competitive, he tells Davos.
The weakening in the euro has been great for Ireland, Enda Kenny declares, by helping exports and tourism. That chimes with Christine Lagarde’s point earlier today about QE expectations already helping.
His big hope is that the young people who left Ireland to look for work will be able to come home, if they choose, bringing new skills.
Irish leader Enda Kenny says Ireland has made important progress since the debt crisis, lowering its deficit, borrowing at record low levels, returning to growth (4% this year, perhaps) and cutting unemployment.
It shows the merits of working closely with the commission and with the ECB,
Antony Jenkins, the chief executive of Barclays, is in Davos and has been speaking to Bloomberg Television.
Here is what he had to say about the recent market volatility:
The one certain thing is that we live in a very uncertain world – look at the price. What is driving this volatility is an increase in geopolitical instability, and structurally lower macroeconomic growth that creates pressure in local economies. We can expect volatility in commodities and currencies for the foreseeable future.Volatility affects every business, but the point for business leaders like me is to build resilience into you business.
If you go back a decade or so, people like me were talking about getting bigger. The reality today is the constraints on balance sheets [with more capital to be held] requires you have to focus. That’s what we’ve done in the investment bank, focusing on where we can generate returns for our customers. I’ve already said the investment bank will be no more than 30% of the business.
Sigmar Gabriel also points out that in 2003, Germany and France broke the measures in the Maastricht treaty.
But there’s a big difference. We started our structural reforms then, but France did not. We’d have had to make even deeper savings to stick within Maastricht.
The Europe debate starts with a question on QE, for Germany’s vice-chancellor:
Have we reached an inflation point where despite all the structural reforms, we need a more active and pro-active stimulus for Europe?
The main hall at Davos is now filling up (slowly) for a debate on Europe, starring four European leaders. They’re discussing the twin challenges of stability and growth.
They are Latvia’s PM Laimdota Straujuma, Irish leader Enda Kenny, Dutch PM Mark Rutte and Finland’s PM Alex Stubb.
Christine Lagarde’s view is that a eurozone quantitative easing programme is already having an effect, as markets have pushed down the euro in anticipation.
But as flagged earlier, Larry Summers argue that the impact of QE is limited:
Santander chief Ana Botin was more upbeat, though — with QE on the way, Europe is heading towards recovery with a more stable and effective currency union. And that’s the end of the session.
European investors appear to be in a cautiously optimistic mood ahead of the European Central Bank’s big announcement on quantitative easing. Germany, which has been strong opponent of QE, is slightly down.
All major indices are slightly up, apart from Germany’s DAX.
With European borrowing costs at such record lows, policymakers must realise that they have more options, argues Larry Summers:
I do not accept that there is limited room for advanced borrowing by Europe… there is limited imagination, he says.
Does anyone think that Europe has a basis for growth if the strategy is QE and asking the south to do more structural reforms?
We’re all for QE in Europe. We can’t afford not to have it. It’s necessary, but it’s not sufficient.
It’s a big mistake to think that quantitative easing is some magic cure for the world’s ills, argues Larry Summers.
I agree with Christine [Lagarde] that QE has already had significant impact, and that’s why I’m worried.
We’ve already had a set of positive developments, and the economic forecasts are pretty dismal from here.
Europe’s youth unemployment crisis shows the need for a big quantitative easing programme from the ECB, says Ray Dalio, head of investment firm Bridgewater Associates.
Sitting alongside Lagarde, he explains:
In Italy and Spain, youth unemployment is 50%. There will be a lost generation.
There needs to be forceful action or there is going to be political extremism.
Chancellor George Osborne’s breakfast meeting with bosses of major UK companies has broken up, Jill Treanor reports.
While those who left were tight lipped about the conversation that took place, it seems that George Osborne was keen for business people to shout out about their ability to create jobs.
Around 30 chief executives and chairman met the Chancellor, who sat alongside the head of the CBI John Cridland.
Lagarde isn’t impressed by the argument that the US economy is too weak to support a rate hike:
If the US is in a bad place, we are short of any engine of growth.
Larry Summers, the former US Treasury secretary, argues strongly that the Federal Reserve should not raise rates yet.
He tells the Davos panel that the risks are “enormously asymmetric..of setting off a spiral towards deflation”.
The Fed should not be fighting against inflation until it sees the whites of its eyes.
Raising US interest rates will strengthen the US dollar even more, and cause a chilling effect on the US economy, Gary Cohn adds (he’s President and Chief Operating Officer of Goldman).
Gary Cohn of Goldman Sachs isn’t so confident that the US will raise rates as early as this summer, as Lagarde suggests.
He tells Davos that while the US economy is growing, he’s concerned about the Fed’s ability to raise rates given what’s happening in the rest of the world, in Japan and Europe.
Christine Lagarde has predicted that the US Federal Reserve will raise interest rates in 2015, probably around the middle of this year.
The Federal Reserve is probably going to raise rates this year. Our expectation at the IMF is it is more likely to happen in mid-year, rather than the end of 2015, contrary to what the markets expect.
Good advanced planning by HSBC, which chose “Europe at the Crossroads” as the subject for its breakfast meeting long before it knew that today would be the day when Draghi was to make his big announcement.
Economics editor Larry Elliott was there, and reports:
Zhu Min, deputy managing director of the IMF, says he is worried about the collapse in investment as a share of GDP across the euro zone. Min said “The ECB should take bold action. An accommodative monetary policy (a posh way of saying “do QE”) will create the policy space for other policy action as well. The ECB balance sheet has shrunk in the past 18 months. It needs to pump liquidity into the system.”
But Anne Richards, chief investment officer at Aberdeen Asset Management, quotes John Maynard Keynes when she says QE will be like “pushing on a piece of string”. Banks will use the extra liquidity provided by the ECB to shore up their balance sheets so they won’t lend it out to the real economy, she says.
It’s a huge day for the eurozone, and for Mario Draghi personally. Can he deliver “whatever it takes” to save the euro, as he promised back in the summer of 2012?
Con permiso Mr Draghi, the hall is rented, the orchestra engaged, now it’s time to see if you can dance.
Angela Merkel and Mario Draghi are two of the most powerful figures in Europe right now, so it’s a little irksome that they’ll be speaking at the same time this afternoon……
The ex-head of the Bundesbank, Axel Weber, is arguing against a big eurozone QE package….even as his former colleagues at the ECB dicuss the idea in Frankfurt.
Climate change continues to be a big issue at Davos. Last night, the president of the World Bank (via the Guardian) put his weight behind the issue.
Jim Kim told us:
“We are seeing the accelerated impact of climate change. Last year was the hottest on record. That matters. Extreme weather is real. It’s a complete no brainer to move towards cleaner more liveable cities,”
The bosses of the biggest companies in the UK have piled into a private breakfast with Chancellor George Osborne in Davos, my colleague Jill Treanor reports.
Salmon and scrambled eggs are on the menu. Among those in attendance are Gavin Patterson, boss of BT, City heavy-hitter Sir Roger Carr and Barclays chairman Sir David Walker. Around 30 people are in attendance.
Good morning from Davos, Switzerland, where the second day of the World Economic Forum is underway.
Virginia Roberts files documents in US court including letter addressed to Buckingham Palace asking prince to take part in two-hour interviewLawyers acting for the woman who alleges she was forced by a multimillionaire financier to have sex with Prince…