Mario Draghi has worked nothing short of monetary miracles over his eight-year term as European Central Bank president through a sequence of unconventional policy interventions. As we count down the days to Mr Draghi’s departure, expectations are building once again that he will be able to pull one final rabbit out of the hat.
Whether long-term loans to banks, a conditional safety net underneath the sovereign bond market, negative rates or quantitative easing, Mr Draghi coaxed and cajoled his colleagues on the Governing Council into delivering it. The naysayers in financial markets might say it has all been for naught. Try telling that to the near 11 million people who have found work since the trough in 2013.
Still, here we are approaching Mr Draghi’s end of term and once again there is a clamour for Mr Draghi to cut interest rates further into negative territory and to launch another round of asset purchases. There is no crisis demanding an immediate response. But global headwinds threaten to stall the recovery and the outlook for inflation remains a cause for concern. Inflation is stuck below, but not close to, the ECB’s target and with every passing month it becomes more likely that households and companies will expect it to remain that way. Another dose of monetary stimulus is clearly required if the central bankers are serious about achieving their mandate.
However, it is not quite that simple. The economy is not in dire straits, and without a crisis many, if not most, of Mr Draghi’s colleagues may remain unpersuaded of the case for action. And his capacity to convince them to act sooner might finally be fading as his date of departure approaches.
Most important of all, it has become harder to do more. The deeper rates go into negative territory, the more you have to worry about the unintended consequences. At some point cutting rates can become counterproductive. When it comes to buying bonds, the ECB has imposed constraints upon itself, which would soon bite if quantitative easing was restarted on a meaningful scale. Those constraints can be lifted, but not without a a degree of soul searching over whether the ECB would be in breach of rules for bailing out governments.
So what should Mr Draghi do? Perhaps he will be able to work his magic one last time and convince his colleagues to act. But that looks a tall order unless there is some significant change in the global outlook. There is a sensible alternative: extract a credible commitment today from his colleagues to act in the future if certain conditions are met. Mr Draghi’s latest speech suggests he is moving in this direction.
The commitment would come in the form of a statement that the ECB will take certain actions under certain conditions. The broad contours of that statement are clear. For example, the ECB will resume asset purchases if inflation is no longer considered to be on a sustainable path back to the target. Unfortunately, this form of words leaves far too much latitude in the hands of his successor on when to act.
In theory, the ECB would describe a threshold level or path for inflation – for example, a lower bound on the end point of its inflation forecast – below which it would be compelled to restart asset purchases. And ideally, as well as describing when the ECB should start using unconventional measures, the commitment should also address when the ECB would stop. That is, the ECB would continue asset purchases until inflation was expected to be back above that threshold. Of course, ECB forecasts are notionally produced by the staff and not the policymakers so the Governing Council would have to take ownership of the numbers if they are going to determine whether or not the ECB restarts QE - but that would be no bad thing.
Mr Draghi’s colleagues will be uneasy about having their hands tied in this way. But this form of words does nothing more than commit them to respect their existing mandate. Economic theory suggests that a far more aggressive ambition - keep easing policy until inflation overshoots the target - could be very effective but it is hard to imagine Mr Draghi convincing his colleagues to make that commitment, and even if they did so, it is hard to imagine them sticking to it. This brings us to credibility.
If Mr Draghi is to convince investors that his colleagues will deliver on the commitment even when he is no longer in the room then he will need to remove the institutional and intellectual impediments that might delay or derail action once he is gone. If investors and economists worry that the ECB is running out of room to cut rates, then Mr Draghi should commission research from his staff to estimate where the true lower bound lies and publish the results. If the market is concerned that the ECB is running out of room to buy more bonds then officially take the decision now that the limits on the amount of each bond issue the ECB can purchase would be raised in the event of a resumption of quantitative easing.
For the moment, these would merely be options. Rates would remain where they are and the reinvestment policy as bonds mature would respect the existing issue limits. The point is that policy space would have been clearly established. And ideally Mr Draghi could secure unanimity within the Governing Council on these decisions - something his colleagues might be willing to give in preference to acting today. Of course, Mr Draghi would probably prefer to act sooner. But a credible conditional commitment for the future is a lot better than doing nothing at all.
Bloomberg
Killing of Qassem Suleimani
Sunday:
GP3 race: 12:10pm
Formula 2 race: 1:35pm
Formula 1 race: 5:10pm
Performance: Guns N' Roses
more from Janine di Giovanni
UAE currency: the story behind the money in your pockets
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Vikram%20Vedha
%3Cp%3E%3Cstrong%3EDirectors%3A%3C%2Fstrong%3E%20Gayatri%2C%20Pushkar%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EStars%3A%3C%2Fstrong%3E%20Hrithik%20Roshan%2C%20Saif%20Ali%20Khan%2C%20Radhika%20Apte%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3ERating%3A%C2%A0%3C%2Fstrong%3E3.5%2F5%3C%2Fp%3E%0A
Destroyer
Director: Karyn Kusama
Cast: Nicole Kidman, Toby Kebbell, Sebastian Stan
Rating: 3/5
UAE release: January 31
Intercontinental Cup
Namibia v UAE Saturday Sep 16-Tuesday Sep 19
Table 1 Ireland, 89 points; 2 Afghanistan, 81; 3 Netherlands, 52; 4 Papua New Guinea, 40; 5 Hong Kong, 39; 6 Scotland, 37; 7 UAE, 27; 8 Namibia, 27
The specs
Engine: 3.0-litre 6-cyl turbo
Power: 435hp at 5,900rpm
Torque: 520Nm at 1,800-5,500rpm
Transmission: 9-speed auto
Price: from Dh498,542
On sale: now
Benefits of first-time home buyers' scheme
- Priority access to new homes from participating developers
- Discounts on sales price of off-plan units
- Flexible payment plans from developers
- Mortgages with better interest rates, faster approval times and reduced fees
- DLD registration fee can be paid through banks or credit cards at zero interest rates
Specs
Engine: Duel electric motors
Power: 659hp
Torque: 1075Nm
On sale: Available for pre-order now
Price: On request
COMPANY%20PROFILE
%3Cp%3E%3Cstrong%3ECompany%20name%3A%3C%2Fstrong%3E%20Switch%20Foods%3Cbr%3E%3Cstrong%3EStarted%3A%3C%2Fstrong%3E%202022%3Cbr%3E%3Cstrong%3EFounder%3A%3C%2Fstrong%3E%20Edward%20Hamod%3Cbr%3E%3Cstrong%3EBased%3A%3C%2Fstrong%3E%20Abu%20Dhabi%2C%20UAE%3Cbr%3E%3Cstrong%3EIndustry%3A%3C%2Fstrong%3E%20Plant-based%20meat%20production%3Cbr%3E%3Cstrong%3ENumber%20of%20employees%3A%3C%2Fstrong%3E%2034%3Cbr%3E%3Cstrong%3EFunding%3A%3C%2Fstrong%3E%20%246.5%20million%3Cbr%3E%3Cstrong%3EFunding%20round%3A%3C%2Fstrong%3E%20Seed%3Cbr%3E%3Cstrong%3EInvestors%3A%3C%2Fstrong%3E%20Based%20in%20US%20and%20across%20Middle%20East%3C%2Fp%3E%0A
2025 Fifa Club World Cup groups
Group A: Palmeiras, Porto, Al Ahly, Inter Miami.
Group B: Paris Saint-Germain, Atletico Madrid, Botafogo, Seattle.
Group C: Bayern Munich, Auckland City, Boca Juniors, Benfica.
Group D: Flamengo, ES Tunis, Chelsea, (Leon banned).
Group E: River Plate, Urawa, Monterrey, Inter Milan.
Group F: Fluminense, Borussia Dortmund, Ulsan, Mamelodi Sundowns.
Group G: Manchester City, Wydad, Al Ain, Juventus.
Group H: Real Madrid, Al Hilal, Pachuca, Salzburg.
'The Batman'
Stars:Robert Pattinson
Director:Matt Reeves
Rating: 5/5
UAE currency: the story behind the money in your pockets
David Haye record
Total fights: 32
Wins: 28
Wins by KO: 26
Losses: 4
LIVING IN...
This article is part of a guide on where to live in the UAE. Our reporters will profile some of the country’s most desirable districts, provide an estimate of rental prices and introduce you to some of the residents who call each area home.
MATCH INFO
Rugby World Cup (all times UAE)
Third-place play-off: New Zealand v Wales, Friday, 1pm
Final: England v South Africa, Saturday, 1pm
UAE currency: the story behind the money in your pockets
Emergency phone numbers in the UAE
Estijaba – 8001717 – number to call to request coronavirus testing
Ministry of Health and Prevention – 80011111
Dubai Health Authority – 800342 – The number to book a free video or voice consultation with a doctor or connect to a local health centre
Emirates airline – 600555555
Etihad Airways – 600555666
Ambulance – 998
Knowledge and Human Development Authority – 8005432 ext. 4 for Covid-19 queries
If%20you%20go
%3Cp%3EThere%20are%20regular%20flights%20from%20Dubai%20to%20Kathmandu.%20Fares%20with%20Air%20Arabia%20and%20flydubai%20start%20at%20Dh1%2C265.%3Cbr%3EIn%20Kathmandu%2C%20rooms%20at%20the%20Oasis%20Kathmandu%20Hotel%20start%20at%20Dh195%20and%20Dh120%20at%20Hotel%20Ganesh%20Himal.%3Cbr%3EThird%20Rock%20Adventures%20offers%20professionally%20run%20group%20and%20individual%20treks%20and%20tours%20using%20highly%20experienced%20guides%20throughout%20Nepal%2C%20Bhutan%20and%20other%20parts%20of%20the%20Himalayas.%3C%2Fp%3E%0A
All%20We%20Imagine%20as%20Light
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About Karol Nawrocki
• Supports military aid for Ukraine, unlike other eurosceptic leaders, but he will oppose its membership in western alliances.
• A nationalist, his campaign slogan was Poland First. "Let's help others, but let's take care of our own citizens first," he said on social media in April.
• Cultivates tough-guy image, posting videos of himself at shooting ranges and in boxing rings.
• Met Donald Trump at the White House and received his backing.
Biog
Mr Kandhari is legally authorised to conduct marriages in the gurdwara
He has officiated weddings of Sikhs and people of different faiths from Malaysia, Sri Lanka, Russia, the US and Canada
Father of two sons, grandfather of six
Plays golf once a week
Enjoys trying new holiday destinations with his wife and family
Walks for an hour every morning
Completed a Bachelor of Commerce degree in Loyola College, Chennai, India
2019 is a milestone because he completes 50 years in business
The specs
Engine: 4.0-litre flat-six
Torque: 450Nm at 6,100rpm
Transmission: 7-speed PDK auto or 6-speed manual
Fuel economy, combined: 13.8L/100km
On sale: Available to order now
Specs
Engine: 51.5kW electric motor
Range: 400km
Power: 134bhp
Torque: 175Nm
Price: From Dh98,800
Available: Now
It Was Just an Accident
Director: Jafar Panahi
Stars: Vahid Mobasseri, Mariam Afshari, Ebrahim Azizi, Hadis Pakbaten, Majid Panahi, Mohamad Ali Elyasmehr
Rating: 4/5
Kandahar%20
%3Cp%3E%3Cstrong%3EDirector%3A%3C%2Fstrong%3E%20Ric%20Roman%20Waugh%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EStars%3A%C2%A0%3C%2Fstrong%3EGerard%20Butler%2C%20Navid%20Negahban%2C%20Ali%20Fazal%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3ERating%3A%3C%2Fstrong%3E%202.5%2F5%3C%2Fp%3E%0A
UAE currency: the story behind the money in your pockets
Du Football Champions
The fourth season of du Football Champions was launched at Gitex on Wednesday alongside the Middle East’s first sports-tech scouting platform.“du Talents”, which enables aspiring footballers to upload their profiles and highlights reels and communicate directly with coaches, is designed to extend the reach of the programme, which has already attracted more than 21,500 players in its first three years.
Essentials
The flights
Whether you trek after mountain gorillas in Rwanda, Uganda or the Congo, the most convenient international airport is in Rwanda’s capital city, Kigali. There are direct flights from Dubai a couple of days a week with RwandAir. Otherwise, an indirect route is available via Nairobi with Kenya Airways. Flydubai flies to Kinshasa in the Democratic Republic of Congo, via Entebbe in Uganda. Expect to pay from US$350 (Dh1,286) return, including taxes.
The tours
Superb ape-watching tours that take in all three gorilla countries mentioned above are run by Natural World Safaris. In September, the company will be operating a unique Ugandan ape safari guided by well-known primatologist Ben Garrod.
In the Democratic Republic of Congo, local operator Kivu Travel can organise pretty much any kind of safari throughout the Virunga National Park and elsewhere in eastern Congo.
Quick%20facts
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The Melbourne Mercer Global Pension Index
The Melbourne Mercer Global Pension Index
Mazen Abukhater, principal and actuary at global consultancy Mercer, Middle East, says the company’s Melbourne Mercer Global Pension Index - which benchmarks 34 pension schemes across the globe to assess their adequacy, sustainability and integrity - included Saudi Arabia for the first time this year to offer a glimpse into the region.
The index highlighted fundamental issues for all 34 countries, such as a rapid ageing population and a low growth / low interest environment putting pressure on expected returns. It also highlighted the increasing popularity around the world of defined contribution schemes.
“Average life expectancy has been increasing by about three years every 10 years. Someone born in 1947 is expected to live until 85 whereas someone born in 2007 is expected to live to 103,” Mr Abukhater told the Mena Pensions Conference.
“Are our systems equipped to handle these kind of life expectancies in the future? If so many people retire at 60, they are going to be in retirement for 43 years – so we need to adapt our retirement age to our changing life expectancy.”
Saudi Arabia came in the middle of Mercer’s ranking with a score of 58.9. The report said the country's index could be raised by improving the minimum level of support for the poorest aged individuals and increasing the labour force participation rate at older ages as life expectancies rise.
Mr Abukhater said the challenges of an ageing population, increased life expectancy and some individuals relying solely on their government for financial support in their retirement years will put the system under strain.
“To relieve that pressure, governments need to consider whether it is time to switch to a defined contribution scheme so that individuals can supplement their own future with the help of government support,” he said.
Company profile: buybackbazaar.com
Name: buybackbazaar.com
Started: January 2018
Founder(s): Pishu Ganglani and Ricky Husaini
Based: Dubai
Sector: FinTech, micro finance
Initial investment: $1 million
THE CLOWN OF GAZA
Director: Abdulrahman Sabbah
Starring: Alaa Meqdad
Rating: 4/5
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Analysis
Members of Syria's Alawite minority community face threat in their heartland after one of the deadliest days in country’s recent history. Read more
