Well, the European Central Bank (ECB) has returned to quantitative easing and is deepening Europe into subzero territory.
In his next-to-last policy meeting, ECB President Mario Draghi pulled the trigger on an interest rate cut and going through with another round of QE.
Subzero interest rates and QE are how we do this, baby.
On Thursday, ECB announced that it would be reducing its deposit interest rate by 10 basis points to -0.5 percent. Officials also agreed to begin acquiring 20 billion euros a month worth of securities starting November 1.
While economists described the move as “open-ended” QE, you could also call it open-ended negative rates. How deeper into negatives can the ECB go, considering that it would be out of bullets in time for the next recession.
MarketWatch added:
Among other steps taken by the ECB on Thursday, policy makers extended the so-called forward guidance on rates, saying they would remain at “present or lower levels” until the inflation outlook “robustly” converges with the bank’s target inflation rate of near but just below 2%. Previously, the ECB said it intended rates to remain at present or lower levels through the first half of next year.
The ECB also made adjustments to its targeted long-term refinancing operations to further encourage lending and, in a bid to ease pressure on bank profitability from a lower deposit rate, announced it would introduce a tiered system that would exempt a chunk of excess reserves parked by banks with the ECB from the negative rate.
Draghi responded to President Donald Trump’s latest tweet, in which he bashed the Federal Reserve.
“European Central Bank, acting quickly, Cuts Rates 10 Basis Points. They are trying, and succeeding, in depreciating the Euro against the VERY strong Dollar, hurting U.S. exports…. And the Fed sits, and sits, and sits. They get paid to borrow money, while we are paying interest!” Trump tweeted.
Draghi clarified that the ECB does “not target the exchange rate, period.”
Well, if you thought Draghi was bad then you ain’t seen nothin’ yet with Christine Lagarde.
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