The recent increase in the wide source of coins has been remarkable, but is your best friend due to the sharp liquidity provision essential for locking. But the chances of emerging inflation are reduced, as investment opportunities are expected to remain very rare between times when liquidity cravings. And then there’s the weakening of the relationship between currencies and inflation.
What the ECB has been unable to do for years with additional economic policy has happened in more than a month of coronavirus crisis: faster economic growth.
Years of asset purchases have had a relatively small influence on the volume of coins in circulation in the economy. Yes, quantitative easing has led to an increase in economic growth, but at most visibly in the rate of an increase in advertising banks’ reserves for the ECB, a basic currency.
The mass of money in the broadest sense: M3 was unaffected because the request for credit remained weak or, according to a couple of critics, QE remained stuck in the economic formula and proved successful in the real economy. The coronavirus crisis has actually replaced the game.
What the ECB has been unable to do for years has happened in months of the coronavirus crisis: accelerated economic growth.
Since the formation of the euro area, there has been no consistency with the design of the month in the source of coins in the broadest sense, as we saw in March, with April and May also obtained some of the expansions of fascheck-ever-fascheck in the source of coins. in the broadest sense. Does that mean inflation is at stake?
Source: Macrobond, ING Research
The sudden increase in the source of coins is the result of the coronavirus crisis, as blockades have left corporations suffering from liquidity with small currencies and costs continue to rise. Governments have provided liquidity relief mainly in the type of tax deferral and currency source for businesses and consumers. The component of the provision in family members and commercial deposits in misleading euro banks is applicable by these means. The other component comes from the provision of bank loans, in turn, with the help of generous and temporarily designed programs by the government.
Deposits for households and businesses increased across 52 billion euros from March to May, while the lending sectors increased through 256 billion euros, a record!
The design of household and business deposits increased through 52 billion euros from March to May, while the design of loans to those sectors increased through 256 billion euros. It’s also a record, by the way. Therefore, it is not the old momentum of the currency in the broadest sense that would lead to further expansion and inflation. Conversely, it sounds like a design, this is the best friend applicable with coin accumulation, precautionary savings, deferred and canceled expenses.
The root cause is blockage and uncertainty. Indeed, the ECB’s review survey on bank finishing indicated that the application for loans for investment purposes is declining, which makes sense given the magnitude of the economic decline and the prevailing uncertainty.
Source: Macrobond, ING Research
Increased deposits are expected to underestimate now that locks are soothed.
As the economy recovers, companies’ preference for emergency liquidity is expected to decline. Demand for bank loans will decline and governments may be able to divert their attention from liquidity support. Over time, deferred taxes can be paid and loans can be repaid. This will decrease the deposits in the formula and therefore M3. Therefore, the design in the coin source turns out to be transient in nature. However, it is unlikely that companies, especially major friendly SMEs, will be able to repay additional loans instantly, as lost currencies will only recover slowly, not for consolidated sectors. This suggests that the liquidity provided through governments and banks, the blockade will remain in the formula for a period of time, and in the component forever, since loans and taxes will never be repaid and may have to be canceled.
The recent increase suggests that really large sums have been entered in the formula and that they could also remain there for more than a year, indicating that there is a possibility of higher inflation. The big question about the possible rising rise in inflation is what companies will do with the bank’s additional currencies once the early preference for liquidity has disappeared.
First, the distribution of non-economic trade savings due to deferred taxes is expected to disappear in the coming quarters as deferred bills mature. If governments use these budgets to reduce their budget deficits, the currencies will disappear from the system.
Second, if there are few opportunities to invest currencies originated by the best friend borrowed for precautionary reasons, companies are likely to be able to repay these loans because we do not expect GDP to return to pre-crisis levels until 2023. This leaves an imperative amount of overcapacity over an era of time, which ranked ads in a slow-investing environment. Despite very favorable lending conditions, this may be the ultimate logical option. This in turn would destroy the currencies in the formula and bring down economic growth.
Source: ING Research
Read the original analysis: Money growth at last in the Eurozone, but don’t expect inflation running hot
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