ECB Not Adding to QE in December Says Analyst

The European Central Bank (ECB) will not to boost monetary stimulus further before the U.S. Federal Reserve hikes interest rates, Adam Posen, President of the Peterson Institute for International Economics, told CNBC Tuesday.

Market watchers broadly believe the Fed will hike rates in December, while the ECB hinted in October that it could announce more stimulus measures in December.

But Posen said the Fed had already “done part of the job” for the ECB by lowering the euro-dollar exchange rate, acting as a further stimulus for Europe as a weaker currency boosts exports.

He believed the ECB would wait until 2016 before it committed to further easing. That could include a cut to the already negative deposit rate, the rate the ECB charges banks to park money with it, as well as an expansion of its existing 1 trillion euro ($1.1 trillion) asset purchase program.

Posen said that “clearly the exchange rate channel is what the ECB is keying on…but I do think it makes sense both politically and tactically for the ECB to wait ’til the Fed moves as we now all expect it to do in December to see how much more they get on euro-dollar.”

“But at the same time it’s not like Europe is booming, it’s not like all of Europe is out of deflation so I think they will move in early 2016.”

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