European Central Bank keeps interest rates unchanged

10 March, 2018, 01:38 | Author: Darnell Patrick
  • Euro jumps as ECB hints at the end of quantitative easing

Donald Trump's top economic adviser Gary Cohn, who had told the US president that markets would slump on a tariffs threat, resigned on Tuesday in a move that could ramp up protectionist measures that risk igniting a global trade war.

President Mario Draghi said he doesn't have enough information on Latvia, "and that's why today we are sending a letter to the European Court of Justice".

However in his press briefing after the decision, Draghi acknowledged that protectionist threats represent a downside risk and described unilateral trade decisions as "dangerous".

A week ago, Trump announced plans for global import tariffs of 25% on steel and 10% on aluminium products, but members of Trump's administration have suggested Canada and Mexico may be exempted.

Investors were concerned that the proposed tariffs could trigger inflation and retaliation from USA trade partners, including the European Union (EU), China, and Canada.

Read full story here. Mike Crapo of Idaho but has attracted several Democratic sponsors as well.

On Thursday, the European Central Bank (ECB) dropped its easing bias, fueling expectations that it will normalize monetary policy in the Euro Zone.

China's exports surged 45% year-on-year in February, while imports grew 6.3%, suggesting continued economic growth despite trade tensions with the USA, official data showed.

The fast is that the ECB Governing Council dropped the part of the forward guidance in its statement in which it says that it stands ready to increase the asset purchase programme in terms of size and/or duration.

The euro jumped higher on the news, rising from US$1.2379 before the bank issued its policy statement to as high as US$1.2425. It should make it easier for people and companies to fund pension savings.

Stock markets continued their recent rollercoaster ride yesterday with European markets shrugging off the departure of Gary Cohn, President Trump's chief economic advisor, despite the fact that it would appear to make the prospect of tariffs nearly inevitable.

During the subsequent European Central Bank press conference, Draghi was able to tone down any hawkishness in the statement in his responses to questions from the assembled group of journalists.

Turning to the monetary analysis, broad money (M3) continues to expand at a robust pace, with an annual rate of growth of 4.6 percent in January 2018, unchanged from the previous month, reflecting the impact of the ECB's monetary policy measures and the low opportunity cost of holding the most liquid deposits. Inflation is lacking, which will put the emphasis on wage growth. Last week, Governor Kuroda opined that neither tightening nor easing last forever, adding that the BOJ can consider unwinding stimulus if inflation hits the 2 percent target in the 2019 fiscal year as expected.

The bond-purchase stimulus has been pumping newly created money into the eurozone economy since March, 2015. The economy is now doing better, but the bank has moved cautiously in ending its crisis measures for fear of roiling recently volatile financial markets.



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