Mario Draghi, President of the European Central Bank, suggested that easy money policies are a strong possibility at the ECB's next meeting in December. This statement was rebutted by Jens Weidmann, the head of Germany's central bank. He said that they should give their current policies more time to work. One of the stimulus policies he is keeping open is an increase in quantitative easing. The reason for doing this is their medium-term price stability goal of 2%. With the low inflation they already have, Draghi wants to increase quantitative easing to reach their price goals. Currently in the EU, the deposit rate is at -.2%. This means that banks have to pay to hold money in the central bank. Because of this, banks are more incentivized to lend to the private sector. This could weaken the exchange rate, boost exports, and boost inflation. In addition, the ECB is currently in the middle of a bond buying program of 60 million euros per month, but they are think up increasing the amount to 80 million euros per month to help increase inflation. Do you guys think that easy money policies are a good idea for the ECB to undergo?
http://www.wsj.com/articles/draghi-vows-to-use-all-instruments-if-price-stability-goal-at-risk-1448009389
1 comment:
On paper the money policies seem like a good idea, they think the policies and quantitative easing will help boost exports and inflation both very good things. But they are very bold policies and they may not work in the long run, perhaps the market just needs more time to get back on it's feet. Sometimes the easiest policies to put in place that have the most impact in the short run can dissolve in the long run, so what is really the best action for the ECB? And like Mr. Weidmann says "the monetary policy measures already taken still need time to fully feed into the economy".
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