President of the European Central Bank announced this morning a) willingness on the part of the ECB to continue the Stimulus beyond September 2016, as was originally intended, currently running at Euro Sixty Billion per month over an eighteen month period; and b) the reduction of ten basis point in the benchmark rate.
This should provide the confidence for an environment of stable growth within the Euro Area, and of course through interexchange extending into the whole of Europe. I imagine this will be very welcome to industry and commerce in Euroland, where they can now plan on a longer period into the future. I would read this to mean there will be no shortage of capital to carry the economic Recovery forward. And of course, there has never seemed shortage of ideas or ambition to innovate and succeed, and hopefully capital will be available to such enterprises and entrepreneurs.
My question is : has the E.C.B. started to print the money or authorised electronic transfer thereof?
Sometimes it has seemed unclear. If the E.C.B. can indeed fund enterprise, in addition to buying asset-backed securities (which seems like taking over old loans with new capital), then it will be doing the job most entrepreneurs will be hoping it does best, to offer capital backing to people already in business and wishing to upgrade their machinery to current standards, and those setting anew with ideas of creating innovative products that will set the trend and likely to find a market in the new economy. As times move on, it is naturally necessary to discard what does not work and replace (and retrain people) with what will be the new trailblazers.
On the whole I believe this is very good news for Europe and especially the Euro Area, this extension of the Stimulus and the slight reduction in the benchmark rate. I was a bit surprised at the market reaction, of the stockmarkets falling a bit, but I imagine they will soon correct after digesting the good news. Once there is more positive activity and consumer appetite picks up in a confident, forward-looking economic climate, core inflation will start to pick up, and in course of time give reason for the interest rate to be hiked. But not just yet, and that should be seen a good news for stable growth and maintaining an even keel. I believe so. Even in the United States, the economy does not seem fully ready to accommodate a rate hike, although it remains to be seen what the Fed Chair announces on 15-16th November.
As for the United Kingdom, following remarks by the Bank of England Governor recently that we won't be seeing a rate hike just yet, perhaps not until early 2017, helps me put in context the information people are receiving from their banks : the interest rate will actually be reduced by 10 basis points. At least, Europe and U.K. seem to be following the same strategy. So far it has done good, so more good can be expected.
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