The ECB is too sanguine about monetary problems

The euro-zone’s difficult monetary conditions will add to the disinflationary pressures in the region. Admittedly, Mario Draghi suggested last week that temporary factors such as the AQR were depressing bank lending, while firms were increasingly tapping non-bank funding. But this is too sanguine. There is little evidence that lending standards are set to ease much after the AQR. And the rise in corporate debt issuance is less encouraging than it first appears. Overall, monetary conditions will add to pressure on the ECB to ease policy further in the coming months.