Categories
Euro zone Monetary policy

ECB easing?

Market is expecting an easing from the ECB at the policy meeting on this Thursday, specifically a policy interest rate cut of 25 basis point.

There are two driving forces for the ECB to engineer an accommodative policy this time. First is the Japanese central bank’s bond purchase program aiming a higher inflation target. Second is the persist lack of economic growth from the euro zone. Different from a few years ago, euro zone now felt a lot of pressure from the international community to shift from austerity to economic growth.

I am not sure if the ECB will cut rate this time. A more logical way might be similar to Japanese central bank to relax the inflation target first and then figure out strategies to pump up inflation. But before doing that, the ECB needs a lot of discussions with the common currency member nations. Germany will sacrifice the most if inflation target is to raise and they likely want to see what they would gain.

If the ECB disappoints the market, then the prices of crude, gold and other commodities will resume downward path. Keep finger crossed.

Leave a Reply

Your email address will not be published. Required fields are marked *