ECB Running Out of Policy Tools

The European Central Bank (ECB) surprised many in the markets on Thursday by cutting its main interest rates to a record low of 0.25 percent in an attempt to help kickstart the euro zone economy.
But what’s left in President Mario Draghi’s arsenal if the bank needs to unleash further accommodative steps after this week’s cut?

“We are doubtful that the ECB can still offer many of these big-bang days in the future,” Carsten Brzeski, a senior economist at ING said in a research note on Thursday.

The policy move has increased the ECB’s reputation as the euro zone’s “pro-active firefighter”, he said, but the cut will hit the ECB’s predictability and make future forward guidance and market expectation management more complicated, he added.

via CNBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza