We congratulate you for taking the top job to lead the European Central Bank. You are definitely an outstanding successor to Mr. Draghi, who has until now skilfully managed the market’s expectations and convinced the sceptics about the required implementation of the central bank’s monetary policy.
You are taking the position in unprecedented times. Interest rates have never been this low. They are driven to even lower levels by declining inflation expectations, many central banks asset purchases, negative economic expectations pushing investors to safe havens and global excess savings.
Your greatest challenge will not be lowering interest rates further more. Your greatest challenge is to achieve higher rates, reflecting a brighter economic future.
The ECB has borne a great deal of the support to the euro area. We doubt more of the same would work. Current monetary policies have less and less desired impact. Other kind of measures, that improve productivity and competitiveness in Europe are needed.
The reverse side of purchasing ever more assets to the central bank’s balance sheet is growing liabilities. The central bank has taken a huge issuer risk burden from the markets, but the repayment risks are still there. If those risks would materialise, we would leave future generations with economic misery and worthless money. Prudent management of the ECB’s balance sheet should be among your top priorities.
We trust your ability to challenge conventional thinking and bringing fresh insights to policy making. And we trust you are prepared to do whatever it takes to lift Europe’s economic prospects.
We support you in your endeavours.
Tomas Hildebrandt is a senior portfolio manager for institutional clients. He is a member of Evli’s asset allocation team and is also working as a market strategist. Tomas joined Evli in 1996 and has been working in capital markets for nearly 30 years.