The euro fell slightly Thursday after signals from the European Central Bank, which has shown itself determined to do as much as possible to fight against the risks of deflation in the euro area.
Thursday night, the euro yielded 0.15% to $ 1.1380, after a sharp rise in recent weeks, which have recently crossed him the $ 1.14 threshold, the highest since October 2015. The euro wins another 4% from 1 January, an increase which may seem paradoxical, given the magnitude of easing measures taken by the ECB, which have been muscled March 10.
However, the ECB’s policy has been somewhat offset by downward revisions of expectations for rate hikes in the United States. The last minutes of the Fed, released Wednesday, have again confirmed expectations more “dove” that “hawk” from the Fed. These expectations have depressed the dollar in recent weeks against a basket of international currencies, including the euro.
The Minutes of the ECB show the will to act, despite differences on the method
On Thursday, however, the ECB was reflected in several means to remind his intention to go further if necessary to fight against the risks of deflation. For starters, the Minutes of the ECB have been published, and showed that at the meeting on 9 and 10 March, the governors agreed broadly on the need to take decisive action. Some, however, expressed reservations about the negative rate and their potential side effects. “A new reduction (more negative terrain) might unduly increase the pressure on the profitability of banks” were concerned some members of the ECB.
On 10 March, the ECB announced a battery of new easing measures. It cut its three policy rates has increased by a third repurchase program assets and launched new long-monetary transactions at low cost for banks.
Also Thursday, the ECB published its latest annual report in which its president, Mario Draghi, said that 2016 will be “an equally difficult year for the ECB as 2015 in terms of global uncertainties …” He added the ECB would apply a “zero tolerance policy towards deflation.”
The “helicopter money” is not under discussion at the ECB
In a speech in Lisbon, Draghi also said Thursday that the ECB “still had many tools” to act. He did not, however, discussed the concept of “helicopter money”, the chief economist of the ECB, Peter Praet, had not ruled recently.
Peter Praet was also expressed Thursday in Frankfurt, where he has backtracked on the “helicopter money”, which is to pay money directly to taxpayers of the ECB. This assumption “is not under discussion” within the ECB, he said. However, he added that if new shock, the ECB could “recalibrate its immediate measures,” clearly implying that further action could be taken.
Finally, in Brussels, the vice president of the ECB, Vítor Constâncio, also assured about the “helicopter money”, that the ECB “does not envisage anything like that.”