ECB Reinforces It Is Ready if Inflation Continues To Be Low

April 14, 2014 Share Print 0

The European Central Bank (ECB) has said it will provide “further stimulus” to the eurozone economy if inflation in the bloc continues to remain low.

Mario Draghi, the bank’s president, said a stronger euro would act as a trigger to looser monetary policy.

The rise of the single currency’s exchange rate is one of the main reasons eurozone inflation is at a dangerously low 0.5%.

One of Mr Draghi’s stimulus options would be quantitative easing (QE).

That is something the International Monetary Fund (IMF) has been suggesting as concerns grow about deflation in the eurozone.

Speaking after the IMF’s spring meeting in Washington, Mr Draghi hinted that QE – the large-scale purchase of financial assets – may be needed.

“If you want policy to remain as accommodative as now, a further strengthening of the exchange rate would require further stimulus,” he said.

Earlier this month the ECB kept interest rates steady, at a historic low of 0.25%, but Mr Draghi said its members were unanimous in their willingness to begin QE if inflation stayed well below their 2% target.
via BBC

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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.