The European Central Bank's stimulus package, including expanding their bond purchasing program and lowering their already negative deposit rate, proved to be insufficient. Even with these actions in place the euro appreciated in value from $1.05 to $1.09. The moves the ECB made moved the stocks, the euro, and bond yield in the opposite direction that the ECB wanted them to go, as they seek inflation and lending. Paul Lambert, head of currency at London-based asset managers Insight Investment said, "The ECB had earned itself a reputation of late as an institution that understood markets and how to beat expectations." The euro surged more than 3% against the dollar, which is the biggest daily surge in six years. The Dow Jones and S&P 500 closed 1.4% lower than when they opened. Mario Draghi, president of the ECB, stated that their bond buying program will be extended by six months. One of the reasons he has for the lack of results they have been getting is that the plans have not had the correct amount of time to show results yet. They project increasing inflation rates in each of the next three years. With the ECB's current policies not meeting their Target's, do you guys believe that their targets will be met in the next couple of years?
http://www.wsj.com/articles/ecb-cuts-deposit-rate-draghi-to-announce-further-measures-1449147451
2 comments:
I highly doubt that the ECB will be meeting any major targets in the near future, especially if they don't take drastic measures. Reason being is because there are just simply too many things not going in their favor. For example, they are not only fighting immense deflation, but also near bankrupt countries such as Greece. With these factors playing against them they will have to take drastic measures to reach targets, which will most likely spur negative short term effects.
It would be interesting to see the implications of getting rid of the euro for free-floating domestic currencies. Maybe an agreement among the EU nations to accept each others' currencies would retain the positive trade benefits but allow nation-specific monetary policy.
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