Hey, Europe: be afraid, be very afraid. European Central Bank head Mario Draghi is perhaps giving markets an early Christmas present during the month of Halloween. But it could turn out to be more of a nightmare for the overall economy than a gift.
It’s reported that within the next six weeks, the ECB could cut interest rates even deeper into negative territory and/or increase the size and scope of its own version of quantitative easing (otherwise known as printing more money to purchase government bonds).
Draghi hinted at this after delivering remarks once the central bank made the decision to leave interest rates unchanged and to persist in acquiring $67 billion (60 billion euros) each month in assets.
“Further lowering of the deposit facility rate was discussed. It is one of the instruments… that I referred to when I said all instruments had been discussed,” said Draghi. “There was no explicit preference towards one instrument or another, all of them were considered.”
He added: “Our approach at today’s meeting was not wait and see, but work and assess.”
The head of the ECB noted that he wants to analyze the economy before taking deeper action. It’s clear that Draghi is worried about the lackluster European economic recovery and the significant slowdown of emerging markets. He’s also concerned about low inflation levels, but with the amount of money he’s printing he shouldn’t really be worried about that.
What did investors do? They sold off the euro, while European stock markets gained around two to three percent.
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