The President of the European Central Bank, Mario Draghi, reiterated on a Bank Conference in Frankfurt the ECB's readiness to further measures to stimulate the economy in the euro zone. An extension of the program for the purchase of government bonds at the ECB's meeting in December is increasingly likely.
Bond purchases at ECB meeting under scrutiny
ECB President Draghi took advantage of his speech at the Frankfurt banking congress in order to reiterate the possibilities, and the willingness of the ECB, with which the dangerously low inflation in the euro zone, in October it stood at just 0.1% over the previous year, can be raised. He made it clear that the ECB, if they should come to the conclusion that the risks to the economy have increased, will use all the instruments at its disposal to boost the economy. Primarily, this is the program for the purchase of government bonds and other securities. The program is running since March of this year, with which the central bank currently pumps monthly € 60 billion into the market. The continuity with the particular statements of the ECB President on a possible extension of the program, suggests that markets are to be prepared for this. Notes on the scope of such a measure, however, are currently not yet known.
Another measure on Mario Draghi said, the penalty interest, which banks have to pay when they park funds overnight at the ECB. Currently banks pay 0.2% interest on this approach, and it is expected by analysts, that this interest rate will be raised. With this measure the willingness of banks to lending should be increased . So far, however, it was not very successful, making an increase of interest rates is likely.
Euro reacts wih losses
In the price of the euro, the probaility of further stimulus measures had a negative impact today. The single currency had almost completely lost the profits of the yesterday again during the day, and the pair EUR/USD is currently trading at 1.0648, a decline of 0.80 percent. Also against the Japanese yen, the euro shows heavy losses at the end of the week. The EUR/JPY fell by 0.81 percent and is currently trading at 130.82, the lowest level since April this year. The heaviest losses shows the euro today against the Australian Dollar. The pair EUR/AUD currently falls around 1.39 per cent, at a price of 1.4715.