Draghi needs to perform juggling act in face of economic uncertainty

London

THE markets expect the European Central Bank (ECB) to widen negative interest rates, currently at -0.3 per cent. The bet is for at least a further -0.1 percentage point, while the ECB could accelerate quantitative easing (QE) by raising the monthly purchases of European bonds from 60 billion euros (S$91 billion) to 70 billion euros.

But ECB president Mario Draghi has a problem. Negative interest rates have dented bank profitability and banks such as Deutsche Bank are already under pressure. Moreover, negative rates illustrate that the eurozone remains depressed and if the current stockmarket rally peters out, business confidence will be dampened.