ECB’s smaller than expected stimulus measures cause stocks to tumble, euro to surge

By FXStreet FXStreet (Mumbai) – In the past one week leading to the European Central Bank’s meeting yesterday the markets had waiting in anticipation, speculating on the easing tools that the central bank would adopt to inject more capital into the system. The core inflation figures have remained dismal in the zone and the ECB was urgently required to step up measures to fight the deflationary pressures plaguing the bloc. The markets had expected 10 to 15 basis points cut in deposit rate and estimated the ECB to add another 300 billion in bond buying under ECB’s QE expansion programme. ECB chief Mario Draghi had sounded extremely dovish before the meeting and had hinted at aggressive easing to stimulate the sluggish euro zone economy.

Stimulus measures not enough

The ECB did cut deposit rate by 10 basis points to -0.3 per cent higher than the previous -0.2 per cent thus moving the rates further into the negative territory. By slashing rates further the ECB aimed at to weakening the euro exchange rate to support exports. The central bank however left both the refi as well as the marginal lending facility rate unchanged. Also, the interest rate on the main refinancing operations and the interest …read more

Source:: FX Street