Penulis : ECB Has Run In Massive Stimulus Program
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ECB Has Run In Massive Stimulus Program
As expected, the ECB stimulus program run by the purchase of asset backed securities (ABS) which accelerated in October 2014 from the original plan next year, and began a program of bond purchases by the dominance of the Euro currency (Covered Bond Purchase Program or CBPP). Thus TLTRO program (Targeted Long Term Refinancing Operations) program is run in conjunction with the purchase of ABS, is a program of quantitative easing (QE) as a further stimulus is still under debate but still scheduled at the next meeting. ABS and CBPP purchase details will be explained at the meeting next month.
Which is unexpected rate cuts performed simultaneously although this decision was not approved by acclamation. Draghi and his colleagues have cut interest rate (refi rate) by 10 basis points from 0.15% (as of June 5) to 0:05%, approaching the rate Swiss National Bank (SNB) is 0.00%. In addition, the overnight deposit rate was also trimmed 10 basis points from -0.1% to -0.2%, as well as the lending rate (lending rate) reduced by 10 basis points to 0.3%. The reason is cuts the interest rate the central bank's response to the annual inflation rate is low (0.3%) and tend to fall, as well as growth stagnates (Data Flash GDP second quarter of this year were 0.0%). The ECB has also lowered estimates of GDP this year from 1.0% to 0.9%, and the rate of inflation this year from 0.7% to 0.6%.
Cutting interest rates is causing unexpected break the support level 1.3100 EUR versus the USD, and the announcement of the purchase of ABS programs make EUR / USD broke the 1.3000 psychological support. ECB press conference has made this a popular currency pair fell more than 200 pips, and again in July of 2013, the level of strong support that appears now is the level of 1.2750. With the difference between ECB monetary policy and the Fed is increasingly clear, analysts expect the support level will be passed soon, however, we can not predict the market sentiment.
By running the LTRO program, cutting interest rates, as well as the purchase of ABS and CBPP further QE program plan, the ECB has run a massive stimulus program. Apparently Draghi and his colleagues could not wait any longer to see the results of the first phase alone TLTRO. The fact fundamental data in the field is different from the expected. It is expected that the ECB started to buy bonds at the end of this year after receiving a signal from Berlin (Bundesbank).
Although not as effective as the ABS program the Fed's QE program which includes purchases of government bonds, but Draghi has shown the central bank's commitment to take concrete action in the fight against deflation and boost economic growth in the Eurozone. He also cautioned that central bank action alone will not fully help the Eurozone economic recovery, the government needs to coordinate with the regional countries in terms of fiscal policy.
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