ECB announces massive stimulus; Trump cries foul
The European Central Bank launched a new bond-buying package and cut deposit rates to stimulate the Eurozone economy
The European Central Bank said it will purchase assets worth €20 billion ($21.9 billion) every month until such time as necessary.
The bank also trimmed its main deposit rate by 10 bps to a record low of -0.5%.
The ECB also attempted to ease bank lending conditions by changing its Targeted Long-Term Refinancing Operations (TLTRO) rate. The TLTRO now matches the bank’s refinancing rate, thus removing a 10 bps spread.
Measures to address slowing growth in the eurozone economy
ECB President Mario Draghi cited a “weakening economic outlook” and continued downside risk. He accordingly exhorted governments “with fiscal space” to act in an effective and timely manner.
The stimulus measures by the ECB were widely expected in view of the US-China trade war and low inflation. Besides, recent economic data has pointed to a slowing Eurozone economy.
This is QE II in the Eurozone. The first round of quantitative easing was implemented four years ago to address a sovereign debt crisis.
Trump takes aim at the ECB and the Fed
US President Donald Trump reacted to the ECB stimulus package with a sharply worded tweet. He effectively accused the ECB of engaging in a currency war:
“They are trying, and succeeding, in depreciating the Euro against the VERY strong dollar, hurting US exports.”
“And the Fed sits, and sits, and sits. They get paid to borrow money, while we are paying interest!”
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