ECB signals its ready to cut rates; opens door to renewed QE measures
Thursday, 25 July 2019 21:43 WIB | FISCAL & MONETARY |Bank Sentral Eropa ECBMario Draghi

The European Central Bank on Thursday made clear it stands ready to cut rates and deliver "highly accommodative" monetary policy, including additional asset purchases, in its effort to push stubbornly low inflation back toward its target amid signs of deteriorating economic conditions in the eurozone.

However, investors appeared to take the statement and subsequent remarks by European Central Bank President Mario Draghi with a grain of salt, lamenting a lack of clear-cut details of policy plans. The euro initially dived following the statement, while European bonds rallied, pushing down yields. Those moves were reversed during Draghi's news conference.

œPolicy makers have clearly not yet made up their mind on exactly what to do, said Jack Allen-Reynolds, economist at Capital Economics, in a note. œWe still think that they will cut the deposit rate to -0.5% in September [from -0.4%]. But by October, we suspect that they will have reached a consensus to relaunch QE, probably with a greater weight on corporate bonds.

QE stands for quantitative easing, in which central banks purchase financial assets to inject liquidity into the economy. The ECB ended its program of monthly bond purchases in December, but has continued to reinvest proceeds from maturing holdings to maintain the size of its balance sheet.

In a statement following its policy meeting in Frankfurt, the ECB Governing Council said it left rates unchanged but expects them to œremain at their present or lower levels at least through the first half of 2020¦ Previously, the ECB had said it expected rates to remain at œpresent levels over that period.

The ECB said policy makers œalso underlined the need for a highly accommodative stance of monetary policy for a prolonged period, as inflation rates, both realized and projected, have been persistently below levels that are in line with its aim.

The ECB said it had tasked committees with examining options on ways to reinforce its forward guidance on policy rates as well as œmitigating measures, such as the design of a tiered system of rates on reserves held at the central bank and œoptions for the size and composition of new net asset purchases.

Draghi said the decision on the statement wasn™t unanimous but was the product of a œbroad convergence of views. He played down disagreements, saying that any time a large number of policy options are discussed there were bound to be differing views.

Meanwhile, Draghi warned that the economic outlook in the region was getting œworse and worse, particularly for the manufacturing sector, thanks to continued global uncertainty tied to trade tensions, the looming British exit from the European Union and other factors. Moreover, he emphasized that policy makers were unhappy with stubbornly low inflation and said the ECB would take a œsymmetrical approach to its goal of inflation running near but just below 2%. Annual inflation in the eurozone was seen at 1.3% in June.

In effect, that means the ECB won™t view a 2% inflation pace as a cap ” a major shift, according to longtime ECB watchers like Pictet Wealth Management™s Frederik Ducrozet, who called it a œhugely important and unprecedented step.

Still, the broader ECB commentary on its œinflation problem and its determination to address it was œstark, wrote Nick Kounis and Aline Schuiling, economists at ABN AMRO, in a note.

These comments suggest that net asset purchases could ultimately persist through 2020, they said.

Traders had seen a nearly 50% chance the ECB would move at its July meeting to deliver a rate cut after another round of downbeat survey data from Germany, the shared-currency region™s largest economy, this week.

Instead, the central bank delivered what analysts saw as a clear-cut signal it is prepared to move as early as September to push its deposit rate further into negative territory while also weighing the possibility of resuming asset purchases.

The euro reversed an initial decline to rise 0.3% to $1.1172 versus the U.S. dollar, while the pan-European Stoxx 600 turned lower, falling 0.8% as U.S. stocks moved to the downside. European bonds initially rallied, sending yields lower and dragging down yields on U.S. Treasurys, but also reversed course. Yields, which move in the opposite direction of bond prices, across much of Europe and the U.S. were higher.

Source : Marketwatch

RELATED NEWS

Bank of England leaves policy rate unchanged at 0.75% as expected
Thursday, 19 September 2019 18:28 WIB

In a widely expected decision, the Bank of England's Monetary Policy Committee held the policy rate unchanged at 0.75% with a unanimous vote. The asset purchase facility remained steady at €435 billion as well. With the initial market reaction, the British pound weakened modestly and the GBP/USD ...

SNB leaves key rate unchanged at -0.75%, USD/CHF eases-off 3-month tops
Thursday, 19 September 2019 14:54 WIB

At its September quarter monetary policy assessment held this Thursday, the Swiss National Bank (SNB) board members decided to leave the monetary policy settings unchanged. The SNB left the benchmark sight deposit rate unchanged at -0.75%. The central bank maintained the 3-Month Libor Target Range...

BOJ keeps policy steady, signals chance of easing in October
Thursday, 19 September 2019 10:47 WIB

The Bank of Japan kept monetary policy steady on Thursday but said it would re-examine economic and price developments more thoroughly at its next policy meeting, signalling the chance of expanding stimulus as early as October. As expected, the BOJ maintained its short-term interest rate target at ...

Fed Makes Second Straight Rate Cut, Splits on Further Action
Thursday, 19 September 2019 01:20 WIB

Federal Reserve policy makers lowered their main interest rate for a second time this year while splitting over the need for further easing, caught between uncertainty over trade and global growth and a domestic economy that's holding up well. œ Although household spending has been rising at a st...

RBA Sees Risk of Property-Price Spike as House-Building Dwindles
Tuesday, 17 September 2019 09:03 WIB

Australia's central bank said there's potential for an upswing in home prices as dwelling construction weakens, while reiterating it's prepared to lower interest rates further. In minutes of its Sept. 3 policy meeting released in Sydney Tuesday, the Reserve Bank also noted that "the upward trend in...

POPULAR NEWS
Saturday, 21 September 2019 03:33
Hong Kong Stocks Close Down
Saturday, 21 September 2019 03:27
Wall Street Falls as Trade Optimism Fizzles
Saturday, 21 September 2019 01:24
Gold Futures Score First Weekly Gain in a Month
ANOTHER NEWS
Hong Kong Stocks Close Down
Saturday, 21 September 2019 03:33 WIB Hong Kong stocks ended the week with another loss Friday as investors fret over the impact of weeks of sometimes violent protests on the city's economy. The Hang Seng Index slipped 0.13 percent, or 33.28 points, to 26,435.67. The benchmark...

DISCLAIMER

Seluruh materi atau konten yang tersaji di dalam website ini hanya bersifat informatif saja, dan tidak dimaksudkan sebagai pegangan serta keputusan dalam investasi atau jenis transaksi lainnya. Kami tidak bertanggung jawab atas segala akibat yang timbul dari penyajian konten tersebut. Semua pihak yang mengunjungi website ini harus membaca Terms of Service (Syarat dan Ketentuan Layanan) terlebih dahulu dan dihimbau untuk melakukan analisis secara independen serta memperoleh saran dari para ahli dibidangnya.