Thursday February 5, 2009 - 15:12:48 GMT
Share This Story
Larry Greenberg - currencythoughts.com
ECB Punts But Doesn't Rule Out Further Easing in March
As foreshadowed, todayâ€™s ECB announcement of no change in rates and the ensuing press conference added little to the marketâ€™s information about the central bankâ€™s thinking. The key refinancing rate remains at 2.0%, down from a peak of 4.25% after cuts of 50 bps each in October, November and January plus a record 75-bp reduction in December. The 2.0% level is now twice as high as Britainâ€™s 1.0% Bank Rate and almost two percentage points above the 0.125% Federal funds target midpoint and the BOJ overnight rate target of 0.1%. ECB President Trichet would not rule out the possibility of a rate cut in March. Neither did he rule such in, merely saying that considerably more information would be available next month including new staff forecasts and that a decision will be based on the facts as seen at that time. It has only been a comparatively short three weeks since the ECB met in January.
In theory, ECB officials run policy using a two-pillar framework, cross-checking their analysis of growth and inflation with their analysis of money stock and credit trends. In truth, a third pillar now seems to be calling the shots, which is the assessment of inflation expectations based on a variety of public and private analyst estimates of such. The main assertion of the statement released today is that medium-term expected inflation remains consistent with the Bankâ€™s target of below but close to 2%. Hence, not cutting rates further now does not constitute falling behind the curve. This is a questionable foundation. See more discussion on www.currencythoughts.com.
Forex Trading News
Daily Forex Market News
Forex news reports can be found on the forex research
headlines page below. Here you will find real-time forex market news reports
provided by respected contributors of currency trading information. Daily forex
market news, weekly forex research and monthly forex news features can be found
Real-time forex market news reports and features providing
other currency trading information can be accessed by clicking on any of the
headlines below. At the top of the forex blog page you will find the latest
forex trading information. Scroll down the page if you are looking for less
recent currency trading information. Scroll to the bottom of fx blog headlines
and click on the link for past reports on forex. Currency world news reports
from previous years can be found on the left sidebar under "FX Archives."