Does the ECB still have ammunition?

Markets are taking a cautious tone ahead of today’s European Central Bank policy decision. The ECB is expected to cut its deposit rate by 10 basis points to minus 0.4 per cent as it takes further action in its struggles to lift persistently low inflation and boost economic growth back to normal levels.

At its meeting in December, the stimulus measures unveiled by the ECB fell significantly short of what many had hoped for.

But today, the ECB is expected to announce more policy easing measures, including a cut in the deposit rate by 10 basis points to -0.40 percent and an increase in the current bond buying programme. There is also a possibly introduce tiered interest rates in an effort to boost inflation in the Eurozone. Inflation in the region is set to remain close to zero until the summer despite the latest rise in the oil prices.

ECB Chief Mario Draghi has a difficult job to try to convince the world the Bank still have the tools to boost inflation and that negative rates and more QE can actually have an impact on the real economy.

The current ECB’s QE programme was launched about a year ago, but the Bank continues to miss its inflation target of just under 2 per cent, as it has done for the past three years. So many are skeptical about what more could the ECB do avert deflation and stimulate the economy, or has it run out of ammunition?

The euro has come under pressure ahead of the ECB meeting, trading around $1.0970 just before the European session open.

The post Does the ECB still have ammunition? appeared first on FXTM Blog.

Source:: Does the ECB still have ammunition?

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