No case for further monetary easing by ECB
Such a move would also create systemic problems in the banking sector
MARKET participants seem to be positioning themselves for another bout of monetary easing by the European Central Bank (ECB). The apparent inability to push the inflation rate upwards against a background of tepid international trade is the major argument cited to support such expectations.
ECB board members, including chairman Mario Draghi, have given them credence by insisting in recent comments on the downside risks to growth and negative inflation figures. Expectations are therefore high that the ECB will announce another round of monetary easing this Thursday, either through a further cut in interest rates on bank deposits or a change in its quantitative easing programme of monthly bond purchases.
The candid observer would already find monetary policy in Europe exceptionally lax, with a zero policy rate and 60 billion euros (S$89.5 billion) of security purchases every month by the central bank. Are the economic situation and cyclical prospects so dire that we need to increase the already heavy dose of monetary stimulus?
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