Essentially, fundamental conditions remain a bit weak, and so there is a reason to keep policy stimulatory – however, this view is strongly conditional on the ECB/Europe not being bat sh*t crazy.
Should the ECB/Europe be bat sh*t crazy, these central banks will be ready to support their respective domestic economies.
It makes sense – you can’t have an organisation being BSC as a central forecast. However, the risk has to be taken into account – which is why so many other organisations are releasing “downside scenarios” alongside their primary forecasts (the RBNZ and Treasury have both done this in NZ).
Again, I stick to the following line. The current banking crisis needs to be sorted by the ECB – fiscal authorities need more discipline, and that is a structural issue, but that isn’t the marginal factor pushing things into trouble now.
The ECB is doing things – but they need to communicate them better. Improve that communication and markets can have more faith in the policies the ECB is already frikken implementing, increasing their effectiveness. By communicating so poorly they are taking on all the costs of their policies, and not receiving a large portion of the benefit. It is on the verge of nonsensical …