The European Central Bank joined the U.S
Federal Reserve in making clear that more stimulus could be coming soon to
support an economy weakening in the face of global trade tensions
The ECB left its key interest benchmarks
unchanged at a policy meeting today but said it could cut them as its next move
Inflation in the 19 countries that use the
euro is at an annual 1.3%, short of the ECB’s goal of just under 2% that is
considered healthiest for the economy, even after years of low rates and
massive amounts of monetary stimulus
While the ECB decided against taking action
today, the comments from Draghi showed determination and supports the view that
the eurozone would get a big easing package at the next meeting in September
This package could involve
Significant
changes to rate forward guidance including dropping the calendar based aspect
in favor of a more open ended version consistent with meeting its inflation
aim;
a
15/20bps cut in the deposit rate;
a
tiering deposit facility being introduced; and
Restarting
of QE to the tune of €25/30bn and flagging potential flexibility to its limits.
Central policies have a wide-ranging impact
on companies, governments and individuals. A return to more stimulus means
cheaper borrowing for companies and governments, which can support business
activity and take pressure off government budgets
