Draghi has two weeks for a good plan
Only two weeks has Mario Draghi to decide how to work out a really good stimulus not to upset his colleagues and investors.
When the European Central Bank policy makers have a meeting in Frankfurt in March 9-10, they are going to take into consideration whether negative interest rates as well as 60 billion euros a month of debt buyings is really enough to stimulate consumer prices or not. With another rate decrease priced in by global markets, the number one question here is to how to customize quantitative easing.
The ECB president has just informed that that there aren’t any limits to how far policy makers are going to go within their mandate. As for sub-zero rates carry risks as well as expanding QE it’s much easier to say than to do.
A QE rise would be a tough challenge, many analysts agree. At least, the vast majority of market participants don’t expect such a move from the ECB.
Additionally, a deposit rate decrease of about ten points from the current value of minus 0.3% is what many investors expect.
As it would squeeze the overall profitability of lenders, officials might introduce grant higher exemptions or a two-tiered rate for minimum reserves. Such a measure is often used by the Swiss National Bank, for instance.