ECB Preview

February 6, 2013

The Governing Council of the ECB is not expected to cut its 0.75% refinancing rate or to take unconventional easing steps at Thursday’s monthly meeting.  The euro area economic recession seems to be flattening in an uneven way, and financial market strains have greatly lessened since November.  Officials like Liikanen have reminded markets that the Council does not directly target the exchange rate but rather only reacts once changes in such are causing clear changes in the inflation outlook.  Such a point has not been reached, but the danger is that upward pressure on the euro might intensify as investors see the ECB as the one monetary authority that is unwilling to engage in currency warfare.  ECB officials will cross that bridge if they come to it, but Pdt Draghi will probably adopt an unconcerned tone in answering questions that deal with a hypothetical response to continuing euro appreciation.

Copyright, 2013, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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