YouSaid · the spoken record

Peter Praet

lines on the record: 39
first: 2020-12-03
most recent: 2020-12-03
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“This message is very well understood by the central bank, by the European Commission, by a number of ministers of finance, if you look at Germany, they would absolutely approve. I think that sort of reasoning that it's now that you have to change and improve institutions, the internal market, especially with the Brexit, you have to do all these things. You have to increase the political cohesion to deal with China. The US will be a bit better in the international relations. But I think what we have seen in the US is a warning for the future. I mean, it will not be as before, even with the new administration. It will not be as before. So Europe has to organize itself, doesn't have much time, and they have to do it now. But it's not easy. I mean, for ministerial finance, because they have their short-term priorities, which is normal.”
2020-12-03 · Odd Lots · Former ECB Chief Economist Peter Praet on What's Next For Central Banks · IDENTIFIED FROM THE TRANSCRIPT · source
“Naively optimistic because the banking union is not even achieved today. I think we don't have much time to do these reforms and they have to be done in crisis actually. And I think it's understood for the banking union, certainly by the ECB, pleading for the capital market union and the banking union. But you need regulatory changes to do that. You need legal changes to do that, solvency law. And there are many things you have to do. And when you see Minister of Finance, for example, their priority today is not really to do that because they have to deal the shock now. And coming with new regulatory changes, tax changes for the future, completing the capital market union, the banking union, it's not the top priority, you know, in the day-to-day life of politicians. They say, well, we'll see that a little bit later because now I have to manage the crisis. But when the crisis is finished, you will lack, of course, of renewed institutions.”
2020-12-03 · Odd Lots · Former ECB Chief Economist Peter Praet on What's Next For Central Banks · IDENTIFIED FROM THE TRANSCRIPT · source
“To the level of pre-COVID shock, to the level not before, well, at best early 2022, before we get to the level, that means there is a huge impoverishment compared to expectations of people. And that means that at some point people were already complaining before in different countries about their status, their wealth evolution, their income evolution. These things will come back. This is not a priority today. But these things will come back. So I think when we talk about institutions in Europe, it's absolutely essential, including the transfer we talk about, that you have a mechanism of surveillance of the money which is being given, that it's efficiently used because if that is in place and things go down later on, you better have tested your new institutions on that. And there, you know, you cannot be optimistic on that.”
2020-12-03 · Odd Lots · Former ECB Chief Economist Peter Praet on What's Next For Central Banks · IDENTIFIED FROM THE TRANSCRIPT · source
“Environment, it doesn't exclude necessarily the state. We know that public infrastructure can play an important role if it's well done, of course. And it's a question of government, but we say it's not supporting aggregate demand that's going to make the treat. I think that would be an illusion again. And we have seen that in the past. I don't see reasons why that should be different in the future. So you need reforms again. And that's why I say in the normalization phase, don't forget we are going to get back.”
2020-12-03 · Odd Lots · Former ECB Chief Economist Peter Praet on What's Next For Central Banks · IDENTIFIED FROM THE TRANSCRIPT · source
“But I would warn generally that the supply side depends of many other things like taxation, regulation, the business environment. And if you support, I mean, that's the more classical view of that. And I think in Europe, if you take the periods before, we saw declining productivity just before the financial crisis. You saw declining productivity growth in spite of high aggregate demand, you know, very strong aggregate demand. So I think it did work. I mean, you need to have a structural reforms to increase your potential growth. So I think there is some point to that, but I would certainly not say that this is a sufficient condition, a necessary condition is that you improve your regulatory, your taxation, your business environment if you really want to change the potential growth. When I say the business,”
2020-12-03 · Odd Lots · Former ECB Chief Economist Peter Praet on What's Next For Central Banks · IDENTIFIED FROM THE TRANSCRIPT · source
“That's an excellent point. I mean, the intuition is relatively simple that if you try to stimulate and support demand and even create excess demand, firms are going to invest, you see. And that would have an impact on supply side. And you can have a sort of virtuous circle support of aggregate demand will be followed by good supply side reaction. There is probably some point with this. I mean, there is always some truth into that.”
2020-12-03 · Odd Lots · Former ECB Chief Economist Peter Praet on What's Next For Central Banks · IDENTIFIED FROM THE TRANSCRIPT · source
“Know there is light at the end of the tunnel, as we say, and they may be faster than some people think. So we have to be prepared for all scenarios. And I confess with you, I'm worried about. Normalization phase, but also more fundamentally about the potential growth in Europe, because normally it should go down and not up. Now, there is a little bit hope that people get wiser, they will invest wisely and all these things, but that's not so much the lessons of the past, what we have seen in the past, but let's hope for that.”
2020-12-03 · Odd Lots · Former ECB Chief Economist Peter Praet on What's Next For Central Banks · IDENTIFIED FROM THE TRANSCRIPT · source
“To a big part of the population and faster than what you expect. So in the second half of next year, then there will be a lot of selling of government bonds because who wants to keep a bund at minus 50, 60 basis points? And so that means that long-term rates, as we have seen in this little episode in the US, will go up. And then you will have to see, you know, at what point the central banks will intervene or not intervene in this normalization phase. I think it's a little bit too early to think too much about this. But the episode in the US, you know, two weeks ago with the vaccine, I think was precisely the sort of scenario I have in mind, you know, but at a bigger scale. And that the central bank should be prepared for that. Steepening of the yield curve, I think, when you have good news, is absolutely not.”
2020-12-03 · Odd Lots · Former ECB Chief Economist Peter Praet on What's Next For Central Banks · IDENTIFIED FROM THE TRANSCRIPT · source
“Between the central bank and the Ministry of Finance, it can be fined as long as inflation is well behaved. And I think that's probably. Part of the good scenario, which has a high probability, and the central bank would then, but imagine, for example, things go much better. And in the market people start to say, look, plenty of people, plenty of investors have bought Boons and other long-term bonds at negative rates for a very long period of long maturity. At some point, as you know, markets function. At some points, when you will see, you know, things improving, there will be a lot of people selling their positions and go to shorter term maturities. And when you see that, long-term rates will increase, you have seen that in the US following modestly 10 to 15 basis points after the announcement on the vaccine. But imagine you go to a situation when the vaccine, it works, it's being given.”
2020-12-03 · Odd Lots · Former ECB Chief Economist Peter Praet on What's Next For Central Banks · IDENTIFIED FROM THE TRANSCRIPT · source
“That are absolutely necessary in spite of what I say. But when things will normalize, it will be quite complicated. And that's why, you see, I say there may be political tensions in different countries. There will be probably more asymmetries. Some countries will do better. And times will be extremely challenging. So you will go with a vaccine and the improvements with the phase of euphoria. And then suddenly the problems of the past magnified by what you just said will come back in force and there will be a lot of claims to say, look, look, I need, for example, you need to put more money in health care. You need to go in climate. And so the politics of the post-COVID shock will be quite complicated. That's not the priority today. The priority today is to get out of this situation. But after it will not be easy.”
2020-12-03 · Odd Lots · Former ECB Chief Economist Peter Praet on What's Next For Central Banks · IDENTIFIED FROM THE TRANSCRIPT · source
“Would improve the supply side and that would make an effort, you know, in innovation and all these things, and at the same time, it will be climate friendly. Now, as we said before, there are many other reforms that you have to do to get to increase your potential growth rate. So this is the right question. And I think that question about sustainability of public finance is addressed by many economies today in a way which politicians very much like, of course, because they say, well, R is lower for almost forever before the growth, below the growth rate. So you can increase your public debt much further than what you thought before. And of course, politicians like that. Now, there's just one qualification to that. So I'm worried about this, but there's one qualification, I think in the short end, you have no choice. So I still believe that fiscal policies, the way they are conducted.”
2020-12-03 · Odd Lots · Former ECB Chief Economist Peter Praet on What's Next For Central Banks · IDENTIFIED FROM THE TRANSCRIPT · source
“To invest in digitalization, but at the same time, if you look at climate, take climate, for example. A lot of the investment will be in climate. And one of the questions is all these investment in climate, which I think are necessary, are this investment going to increase the potential growth rate? This is not obvious, of course, because you could say, you know, the pollution is lower and in the long run it's better for societies even in the short term, but it's better and maybe you have lesser tail risk and shocks climate shocks than before. But in between, you know, your potential growth is maybe not stimulated by that. This is a key question. That's why the European Commission came with a combination of climate change investment and digitalization. That was a, I wouldn't call it the trick, but that was the beauty of their plan is to say, look, I have something.”
2020-12-03 · Odd Lots · Former ECB Chief Economist Peter Praet on What's Next For Central Banks · IDENTIFIED FROM THE TRANSCRIPT · source
“So I think this is a real issue. Now, Europe, European politicians, I mean, have understood that actually the recovery plan is precisely to try to answer to your question by saying, look, we don't talk about support measures for the economy as it is, but we want to invest in technologies of the future digitalization. Now, the question, can they realize that? Because as you know, before the crisis, you know, potential growth was trending down in most economies was trending down. It was not trending up. And so these problems of the past are still there. So the optimistic view, which I must say I don't share really, I think it's going to be very challenging. But the optimistic view is to say, well, there's a big shock. People have understood that your future depends, you know, of innovation and all these things. Europe is going to make a lot of efforts to improve the economy, et cetera, et cetera.”
2020-12-03 · Odd Lots · Former ECB Chief Economist Peter Praet on What's Next For Central Banks · IDENTIFIED FROM THE TRANSCRIPT · source
“You know, Joe, this is my main concern what you say now. Because when you look at major shocks like the global financial crisis, but also other shocks, you know, the oil shock in the 70s, what you always saw is that the potential growth went down. So the long-term growth went down. So it hit very much the supply side of the economy. And so, you know, when you talk about, for example, the fiscal policy and the sustainability of debt, people will tell you, good news, you know, interest rates are very low and the growth rate is higher. So, you know, you can have sustainable debt at much higher ratios. The problem, of course, is that J, you know, the growth rate, the long term, has also fallen. So interest rates go down, but the long-term rates also go down. And the extent to which this happened is not sufficiently factored in the long-term debt sustainability analysis that you see among many market participants.”
2020-12-03 · Odd Lots · Former ECB Chief Economist Peter Praet on What's Next For Central Banks · IDENTIFIED FROM THE TRANSCRIPT · source
“More normal time, you know, you may have more minor shock, and what are you going to qualify as non-fundamental volatility, what is more close to the fundamentals? And this is a tricky issue. So in acute phase, you don't ask yourself this sort of question because you have to act and very quickly and front-load your interventions. And I think the ECB did pretty well with the COVID shock. I was very impressed, I must say, by what they did.”
2020-12-03 · Odd Lots · Former ECB Chief Economist Peter Praet on What's Next For Central Banks · IDENTIFIED FROM THE TRANSCRIPT · source
“The reaction of the central bank to the sort of shock that we saw was very clear. So I think it wouldn't have changed. But in the future, it may be when you think about the length of your interventions in the markets or the way you intervene in specific markets, like with the pandemic purchase program, I think there you need that sort of discussion about how the market prices right. Do you see movements which you think are exuberance? You know the ECB, for example, has said, you know, when we want to go against non-fundamental volatility in the spreads, you know, that's sort of a message. The non-fundamental volatility in spreads of some countries, for example. I mean, when you go into that sort of reasoning, it's very delicate to do. I think in crisis you can say that because there was so much excess volatility. But when you go into...”
2020-12-03 · Odd Lots · Former ECB Chief Economist Peter Praet on What's Next For Central Banks · IDENTIFIED FROM THE TRANSCRIPT · source
“Monetary policy decisions are not very focused on financial stability in general if you have a big shock of course there will be but there will not be a systematic discussion about financial stability risk and a sort of you know what are the trade-offs you know between the different risks I think this has started in recent years and I think it will continue as Christine Lagarde I think has rightly said you know in response to the German constitutional court issue by saying you know we look at you know the pros and cons of our measures including you know the side effects on financial stability but I think this will have to be done in a more systematic way in the deliberation of monetary policy it's not easy to do you know this sort of arbitrage I think if that had been done in recent time with the COVID shock for example I don't think it would have changed anything in monetary policy because it was the”
2020-12-03 · Odd Lots · Former ECB Chief Economist Peter Praet on What's Next For Central Banks · IDENTIFIED FROM THE TRANSCRIPT · source
“What you have to do, but we know, for example, in the United States, the toolbox in terms of macroprudential instruments is not very impressive. I mean, if you look at the US. And I know that in several speeches, you know, some governors in the US have complain about this. So that's an issue. In Europe, I think we have a little bit more in the toolbox at the national level and also the European level, but essentially the national level. But I would agree also that the toolbox in macroprudential is not impressive for the time being to deal with the problems you mentioned. I think the central banks in their monetary policy deliberations, you know, when you decide about QE, if you do more QE, I think in the future, they will need to put in the discussions, in the monetary policy discussions, to give a more prominent role to financial stability consideration. Usually, you know,”
2020-12-03 · Odd Lots · Former ECB Chief Economist Peter Praet on What's Next For Central Banks · IDENTIFIED FROM THE TRANSCRIPT · source
“Could people would then say, well, look, there is a backstop. If asset prices fall, anyway, the central banks would intervene. And that may lead, of course, to excesses in the markets where people don't perceive the tail risk on the left side. And they basically say there is a backstop from the central bank. So I think central banks have to be very cautious. And I personally, when I was there, always avoided to say things that I read sometimes in communication of central banks. For example, they say we want to ensure that financial conditions are going to remain accommodative. I think that's fine. That's what they want to do. But you want to ensure something is, well, you know, you have to be careful about that. What do you do about this? I mean, the answer, the classical answer is to say, well, you have to monitor this sort of risk. So you have macroprudential framework, you have regulation and supervision.”
2020-12-03 · Odd Lots · Former ECB Chief Economist Peter Praet on What's Next For Central Banks · IDENTIFIED FROM THE TRANSCRIPT · source
“Bond prices, everything, credit spreads, and all that. When you say financial conditions. So it's a sort of compact, you know, a sort of average of all asset prices. And if you say you want to keep them accommodative, I think it's fine. That's your objective. But of course, at some point, it gives the impression among market participants that it's a sort of backstop or a sort of put, cheap put option, which is put in place by central banks basically saying, well, look, if there is an event somewhere and financial conditions deteriorate, maybe because equity prices suddenly fall very much. And what would be the reaction of central banks? So markets start to internalize the reaction function of the central bank saying this is a quasi-objective of the central bank is to keep financial conditions as they are accommodative. And then the”
2020-12-03 · Odd Lots · Former ECB Chief Economist Peter Praet on What's Next For Central Banks · IDENTIFIED FROM THE TRANSCRIPT · source
“Yes, I think that's an excellent question. For the time being, it's a question around financial stability and financial stability risks moving from the banking sector to the non-bank, the other financial institutions. And we don't have that to the same degree as in the United States. So I think it's still in Europe. I would say it's unfortunate. In Europe, you still have a highly bank intermediated environment. And as I said, you have a shock in SMEs, which really depends on banks. It's very simple. So that's the priority. On the other hand, you're right. I mean, when you look at the instruments like QE and when the central banks, for example, also in Europe, I said that also, we want to ensure that financial conditions remain very accommodative. Well, financial conditions are equity prices, you know,”
2020-12-03 · Odd Lots · Former ECB Chief Economist Peter Praet on What's Next For Central Banks · IDENTIFIED FROM THE TRANSCRIPT · source
“That's a very good question. I would say yes, in particular, I give credit to very brilliant people in the staff of the ECB and they are still there, very creative people, and it is true that ECB has very often been very innovative.”
2020-12-03 · Odd Lots · Former ECB Chief Economist Peter Praet on What's Next For Central Banks · IDENTIFIED FROM THE TRANSCRIPT · source
“The ECB came. Then, of course, I was very much involved in the design of what we call the OMT, which was basically that ECB would do whatever it takes, but it would not be a blank check. It would be subject to a conditionality framework where European institutions would be, and political institutions, this would be involved. So I think the framework, severe scale, but it came. And that's why I say Europe will be forged in crisis fine. We survived, but it was very close, I must say. And so it worked. The COVID is a new situation indeed.”
2020-12-03 · Odd Lots · Former ECB Chief Economist Peter Praet on What's Next For Central Banks · IDENTIFIED FROM THE TRANSCRIPT · source
“And I know some politicians at the time thought that the ECB was not reacting sufficiently fast to the innovations that were decided by the government. And so there was a little bit for the president also the timing of the announcement that the ECB had to do. I think it had to do that. And certainly the ECB would not, I don't think the ECB would not have made that sort of commitment without the institutional improvements that were decided by at the political level. And the markets understood, I think, pretty well that the politicians would back the central bank and they would also improve the institution of the monetary union, which caused all the problems we saw. And so the fundamentals, the institutional fundamentals would improve and the central bank would support that by its commitment. And then, you know,”
2020-12-03 · Odd Lots · Former ECB Chief Economist Peter Praet on What's Next For Central Banks · IDENTIFIED FROM THE TRANSCRIPT · source
“And no, it worked pretty well. And then you have to ask yourself why did it work really? First, I mean, you have to be a good communicator. I think that he was. He knew that he would be backed by the governing council, even if there would be some problems potentially, but he would be backed by the governing council. Certainly a strong majority of the governing council. And maybe more importantly to all this is that before the announcement of Mario in July 2012, before that, you had the head of state and government that decided to improve the institutional setting of Europe by putting in place a single supervisory mechanism, the supervision of bank looking at crisis management. So there was an institution which was accepted by government, by the politicians, before the”
2020-12-03 · Odd Lots · Former ECB Chief Economist Peter Praet on What's Next For Central Banks · IDENTIFIED FROM THE TRANSCRIPT · source
“I think we can say that the President of the Central Bank took his responsibility by making that announcement. So that is a sort of announcement that is not without risk, I think, so that I gave him really the credit by taking this risk as a president, because that's, as you say, something, it may not work.”
2020-12-03 · Odd Lots · Former ECB Chief Economist Peter Praet on What's Next For Central Banks · IDENTIFIED FROM THE TRANSCRIPT · source
“No, you're right. I mean, I was very often surprised that in spite of all what you say, that it worked, we always in the governing council could decide. And of course there were some different views in the governing council, which is not the case today with the COVID shock, which is a bit of a different situation. But in these years, you had, of course, a lot of differences across countries, some like Germany recovered.”
2020-12-03 · Odd Lots · Former ECB Chief Economist Peter Praet on What's Next For Central Banks · IDENTIFIED FROM THE TRANSCRIPT · source
“Because Minister of Finance, they look at the political business cycle, and so when they spend the money, it's linked to a political cycle which is not necessarily the business cycle. So basically the consensus was business cycle policy basically when the economy goes down, you lower the rates and then the economy goes up. If you have inflation, you tighten. I mean, that model alla rule, if you...”
2020-12-03 · Odd Lots · Former ECB Chief Economist Peter Praet on What's Next For Central Banks · IDENTIFIED FROM THE TRANSCRIPT · source
“No, you're right. I mean, there are unique challenges because you have one central bank and then you have different ministers of finance, different countries. So you don't have a single fiscal policy. But many of the problems we have in Europe are the same as in Japan or the US, in the UK. So they are common to all central banks. Let me just remind you that in the 80s, the world of central bank can change very fundamentally. There was sort of general consensus that business cycle policy, smoothening the business cycle would be delegated to the central bank. Governments basically, the Ministry of Finance, would basically, of course, let their fiscal policy react automatically to business cycles, but discretionary policies would not really be trusted from Ministry of Finance.”
2020-12-03 · Odd Lots · Former ECB Chief Economist Peter Praet on What's Next For Central Banks · IDENTIFIED FROM THE TRANSCRIPT · source
“The political reaction in many countries will be totally the opposite. I mean, you can imagine you give grants to one country that has been hit more. Part of that money is paid by richer countries. And then that money is unwisely spent in consumptions, well, maybe income support. That's not the objective now. And there will be a surveillance process how the money is being spent. If that process is well done, I think then we can start talking about a game changer about all this. I would say for today this is one shot. It's extremely important, I think, and certainly for the business cycle, but for the longer run, I think we have to see how this money is being used. And you cannot tell today. Because it's complex also”
2020-12-03 · Odd Lots · Former ECB Chief Economist Peter Praet on What's Next For Central Banks · IDENTIFIED FROM THE TRANSCRIPT · source
“That most analysts would have is how do you spend that money? I think money would be spent, but how do you spend that money? Because, I mean, at some point you have to reimburse that money and the impact of the COVID crisis usually is to lower your GDP potential growth. And it weakens the economy for a while. So the whole plan, that's why it's called recovery plan. It's basically directed for investment and investments are supposed to increase potential growth and that would mean the reimbursement of debt, common debt also easier in the future. But that's the biggest challenge now in Europe. If it's a success, that means that the real money, there will be real money. When the real money is spent, if it's spent correctly across the jurisdictions in the different countries, I think that could serve very positively the union in the future. Now, if it's the other case, there will be...”
2020-12-03 · Odd Lots · Former ECB Chief Economist Peter Praet on What's Next For Central Banks · IDENTIFIED FROM THE TRANSCRIPT · source
“Well, here, you know, the final approval from the recovery plan is not done because basically two countries, Hungary and Poland, threatening to veto the whole project. And so that means there is today, today, uncertainties about that. On that point, just to, because this is news today, I mean, I would not be too worried because in Europe, when you cannot agree with 27 countries, you can have if there were a coalition of willing, you know, at least with nine countries, you can still within the European treaties, you can still do the things they want to do now. So I think they will finalize, at least for most countries, what they decided to do. That means a big expansion plan, they will do that. The question now, which is new? I mean, this is really real money for a big part of that. The main concern.”
2020-12-03 · Odd Lots · Former ECB Chief Economist Peter Praet on What's Next For Central Banks · IDENTIFIED FROM THE TRANSCRIPT · source
“right institutions know. Europe puts in place institutions like banking supervision, for example, at the global financial crisis. But then they tend to go backwards to finalize what they've started with and come with new problems. So I think there is always an element of ambiguity in institutional reforms in Europe that puts risk to the Union.”
2020-12-03 · Odd Lots · Former ECB Chief Economist Peter Praet on What's Next For Central Banks · IDENTIFIED FROM THE TRANSCRIPT · source
“You know, the communication is that this is a one off, you know, you should not prejudge that you're going to do that for the future. These will be discussed discussions for after and we will see. We cannot prejudge that there will be a sort of more permanent transfers. But I think it's important what happened. I wouldn't call it, as many people say, Hamiltonian moment, referring to the US history. I wouldn't call it that way. But I would certainly recognize that this is a very important thing. Hadn't this happened, the Union would have collapsed. I think this is, you know, the head of states were so worried about the potential consequences on the union of the COVID crisis and the economic effects of the crisis that they, as they did in previous events, came with this huge stimulus program at the European level. So I think it's positive, but it doesn't guarantee you that you have the”
2020-12-03 · Odd Lots · Former ECB Chief Economist Peter Praet on What's Next For Central Banks · IDENTIFIED FROM THE TRANSCRIPT · source
“You know, there was this famous quote from Jean Monnet by saying Europe will be forged in crisis. I always said, you know, prevention is better than reacting to crisis. Of course, you have to react to Christ. It's better than the opposite. But I think that's a little bit a risky strategy. I mean, because Europe in the past events that we had with the global financial crisis, the sovereign debt crisis, and now the pandemic, well, Europe was not really prepared for that sort of situation. And so the good news, of course, is that in crisis, Europe reacts very strongly. And that's the positive news. But on the other hand, very often they are caught by the events and the events go faster than the capacity to reform the institutions. Now they came, as you rightly mentioned, with extremely important decisions in the middle of the crisis, the pandemic crisis, coming with transfers, issuance of common debt, but they always say.”
2020-12-03 · Odd Lots · Former ECB Chief Economist Peter Praet on What's Next For Central Banks · IDENTIFIED FROM THE TRANSCRIPT · source
“More or less already in our scenario before the announcement, the two announcements we had in recent weeks. But personally, I think the vaccine now has a much higher probability. So the variance, actually, the uncertainty around the vaccine, the spreading of the vaccine, I think this is, you have reduced the uncertainty. Yes, that would be a positive factor. So for the time being, the central bank and the ECB, I think in particular, they just want to bridge it to that situation in the second half of next year. So you don't need to do much necessarily, but you want to ensure that the financial conditions, the easy conditions that you have today are maintained in a situation when governments are going to spend more. What comes after? Well, we can discuss that later because that will not be easy.”
2020-12-03 · Odd Lots · Former ECB Chief Economist Peter Praet on What's Next For Central Banks · IDENTIFIED FROM THE TRANSCRIPT · source
“Trying to bring the curve, you know, the yield curve lower than what it is today would stimulate domestic demand. So I don't think it will. So basically, some economists have even alluded to the fact that to some extent it resembles a yield curve control. You want to keep the curve, the interest rate curve more or less as it is today. But to do that, to do that, you may need, of course, to buy more bonds given the huge issuance of government bonds. So just to stabilize the conditions, you may need to add another round of QE basically on what is called the TELTRO, you know, the pandemic emergency purchase program of the ECB. That's the short term. And you want to bridge what? Well, I mean, it's a vaccine story. The vaccine is for the time being not taking as an upside, a very big upside in the projections of central bankers in general. They just say, well, it was more”
2020-12-03 · Odd Lots · Former ECB Chief Economist Peter Praet on What's Next For Central Banks · IDENTIFIED FROM THE TRANSCRIPT · source
“And for that sort of situation here, I think it's absolutely clear that you need more policy stimulus and basically from the fiscal authorities. So I think that's accepted by most economists. I think that's to me very clear. The role of the central bank here, as has been communicated recently, which is relatively new, actually, is basically that the central bank wants to preserve the easy financial conditions that you have and not to try to add accommodation. Basically, the message you get from the central bank is to say financial conditions are okay. You know, they're easy across countries also, not only on average, but across countries. And so it's important to preserve these conditions in a situation where the expectation is that governments are going to come with new stimulus measures. I think that's fair enough. I think that's fine. I don't see why by adding accommodation.”
2020-12-03 · Odd Lots · Former ECB Chief Economist Peter Praet on What's Next For Central Banks · IDENTIFIED FROM THE TRANSCRIPT · source
“I think you have to distinguish a little bit the short term and the medium term here. I think it's always the case, but I mean, it's particular that in the situation because you have the second wave, which has been very strong actually and has led to lockdowns in different countries at different degrees.”
2020-12-03 · Odd Lots · Former ECB Chief Economist Peter Praet on What's Next For Central Banks · IDENTIFIED FROM THE TRANSCRIPT · source