Slides ECB could expand its stimulus plan if the economy … – Economy and Business Online

slides ECB could expand its stimulus plan if the European economy needs

Friday, March 6, 2015
Pablo Rossi Bove
Economics and Business

The maximum monetary authority in Europe said yesterday that on Monday the first installment of 60 billion euros will be injected to revive a languishing economy in Europe.
 
 - Eurozone GDP grew by 0.3% in the fourth quarter of 2014
 

The President of the European Central Bank (ECB), Mario Draghi, announced yesterday at the monetary policy meeting held in Nicosia, capital of Cyprus, an entity begins Monday March 9 to buy government debt in the Eurozone. It will do one installment US $ 66 billion (up US $ 1.26 billion), with the aim to revive the bloc’s economy and raise power and low inflation.

Beyond confirming the specific date, most transcendent speech was Draghi hinted that it might be necessary to extend the program after September 2016, the date when injections end money- to achieve the inflation target, waiting to be close to 2% annually.

The only clue was given on this point is that the end of monetary stimulus will depend on the recovery of inflation block.

Also, Draghi said that remain unchanged interest rates, which are at historic lows of 0.05%, as the market expected. He said not alter deposit rates negative (-0.2%); that is, the interest it charges banks leave their money in their coffers, with the aim of obtaining greater liquidity.

Draghi said the program to purchase public and private debt adopted on January 22 has already had positive effects and referred to the increase in money supply, which was 4.1% in January from the 3.8% in December. He also stressed that loans to households increased 0.9% in January from 0.8% in December.

The monetary stimulus plan would improve the profitability of the Chilean stock exchange, resulting in a positive impact on emerging markets that have so far.

 In turn, the team IM Trust believes that the purchase of debt by the bank “should foster an appreciation of the Chilean peso, because it will put pressure on rates globally”. Also, warn that global scenarios of abundant liquidity are very favorable for risk assets and “the Chilean peso is presented as an asset that should be benefited by this international setting” .

Finally, a scenario lowest price euro, Chilean exports to the block will be most affected by the exchange rate.