UK referendum on EU membership: to date, research on the cost of Brexit have failed to shift public opinion in any way…….
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Intesa Sanpaolo – Research Department For professional investors and advisers only
ECB: based on the meeting accounts, the latest monetary policy measures met with limited internal dissent, but this does not seem to rule out the possibility of further accommodation in the course of 2016, if required by data. The central bank is engaged in a public campaign to support the effectiveness of monetary policy.
In the past week, voting intention polls ahead of the referendum on the UK’s European Union membership failed to outline any progress to the advantage of the “remain” campaign. In fact, the two latest polls recorded a slight retreat compared to the previous weeks, and a further narrowing of the lead over the pro-Brexit front. Given the still large number of undecided voters, and the doubts clouding the turnout, any outcome seems possible at present. The slight loss of support for pro-EU positions came despite the publication of a number of papers that pointed out the economic cost of a potential exit from the Union, the limited impact of the benefits stemming from smaller fiscal transfers, and the prospect of financial turmoil in the event of “leave” votes prevailing. To date, neither the more rational cases made against Brexit, nor the more fragile ones on the short-term effects of a departure from the EU, have managed to make a serious impression on public opinion. The “remain” campaign needs to become more aggressive to counter the risk of an unfavourable vote (currently very real).
Constancio and Praet are engaged in intense propaganda activity in support of the monetary policy measures put in place over the past two years by the ECB. Praet, who had recently resumed stressing the importance of the central bank reacting to the straying of inflation from the targeted path, presented on Thursday the estimates on the effects the measures have so far reaped on rates, growth and inflation. According to the ECB, easing measures will raise GDP growth in the period 2015-18 by 1.5%, i.e. about a third of total cumulative growth. The insistence of board members in emphasizing the benefits of ECB measures, displayed in the recent past also by President Draghi, reflects the need to defend monetary policy from accusations that it is ineffective, originating not only outside, but also within the central bank. For what concerns the internal opposition, the accounts of the March meeting of the Governing Council reported that two members voted against the package of measures, and that another two raised more specific objections, but the support for easing measures in general was strong. The level of dissent, therefore, was rather contained. True, both German representatives were probably among the dissenters, once again highlighting that in Germany many are still uneasy with the current monetary accommodation process, despite mounting evidence that the choices made so far have been correct. However, this does not in any way rule out the possibility of the ECB putting in place further accommodative measures in the course of the year, if data flows continue to disappoint. In any case, such measures are unlikely to include extraordinary direct money base injections into the balance sheets of households and businesses: several members of the Governing Council, including some of those more in favour of an aggressive monetary policy conduct, have firmly denied that such an option was seriously discussed. Constancio also touched on other themes, which have now become recurring in the ECB’s communication, such as the call for synergetic monetary and fiscal policies, and the need to complete the banking union as a European deposit insurance mechanism. However, the difficulties being encountered by governments at home, the migrant crisis, and the UK referendum, risk leaving the ECB’s calls unheard. Another topic covered by Constancio were the rules on the treatment of government bonds, but only to say that the changes will take into account the weight they hold in liquidity portfolios.
Source: BONDWorld.ch
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