ECB ready to further support euro area Financial

The central bank says it is following developments closely. “We are ready to take appropriate and targeted measures.” Earlier today, Luis de Guindos Vice-President of the ECB said that the ECB is “vigilant” and “ready to adjust all instruments to ensure that inflation moves towards our goal.”

On Friday, Jay Powell, president of the US Federal Reserve, gave a similar message. It fell in good ground. Hoping that central banks would open the money tap again, the American S&P 500 index closed 4.6% higher on Monday evening. Last week, stock exchanges worldwide fell down en masse because of the corona virus. It was the worst trading week since the financial crisis.

Next Thursday, at the end of the interest rate meeting, the ECB will release new economic estimates. The question is how great the negative effect of the corona virus is on economic growth and inflation.

ABN Amro expects central banks worldwide to provide incentive measures in the short term. According to them, the ECB will lower the deposit rate, which now stands at -0.5%, by 10 basis points. The monthly amount for which bonds are purchased goes from € 20 billion to € 40 billion. Conditions for loans to banks will also be relaxed.

In the US, ABN expects interest rates to fall by 50 basis points. “A rate cut does not cure the virus, but it can mitigate the economic consequences.”

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