ECB Cuts Rates - Again
The ECB, surprisingly, cut again its three main interest rates. Mario Draghi, the ECB President, “announced plans to buy private-sector assets, suggested quantitative easing is still on the table and that rates are the lowest they will go”. (Source: WSJ MoneyBeat)
In more detail, the ECB has cut the Refinancing rate to 0.05% and the Deposit rate to -0.20%, both down 0.10%. After the cut, the euro fell sharply and currently trades at about 1.294 USD, its lowest point for many months.
At the same time, the Bank of England has left unchanged its interest rates at 0.5%.
Do you think that these measures are going to get Europe out of the deflationary pressures? At the end of the day, the ECB can only do so much. In my opinion, European governments need to act also if they want to avoid a prolonged period of low inflation/deflation and virtually no growth. What do you think?
It might work, or it might fail and Europe could turn into Japan. Nobody knows, least of all, the ECB. We don't even know how much ABS/covered bonds they're intending to buy, 'cause they probably haven't decided themselves. We have to wait and see and not get too excited prematurely...
As I've stated numerous times before, if negative interest rates are not a signal of peak credit, I do not know what is. Given what we know about the EU and its history prior to being the EU, what underlying cause that led to the current deflationary pressures has changed? I assure you rates being above zero wasn't the problem.
Someone give me a hand, I need to carry this bitch for awhile.
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