In early December, perhaps this will be the turn of Jean-Claude Trichet, President of the European Central Bank (ECB), implicitly recognizing that the crisis is stronger than it ever would have imagined. So strong that it could force the ECB to deviate sharply to its usual strategy of small steps and its monetary orthodoxy.
The market expected. Investors expect 95% that the monetary authority reduced by 0.75 point rate of the euro zone, Thursday December 5, reducing the cost of money of 3.25% to 2.50% .
"This would never-seen", says Jean-Louis Mourier, an analyst for the company Aurel Exchange. But we must fight against the crisis, and "10% of investors believe that the ECB could lower its rates by 1 percentage point," he says. The Swiss National Bank (SNB) did not cut 1 percentage point its rate on November 20 and the Bank of England of 1.5 percentage points a month ago?
EXPEDITED collapse
The prognosis for such a relaxation rates in Europe have helped to reverse the euro against the dollar. On the week, the single currency, which had risen briefly above the threshold of 1.30 euro to the dollar, is thus fell to 1.2690 dollars Friday.
For the ECB, go so far will be difficult. Especially for some of its members anxious not to derail the "money". And if Mr. Trichet has said, Wednesday 26 November, ready to lower interest rates, there is debate about the extent of the decline. Lorenzo Bini Smaghi, one of the ECB, has been careful to remember that "in the spaghetti westerns-" good if they win the first draw, but should also reach its target. "There is no scene also depressing that when the cavalry is surrounded and has more ammunition," he said.
In other words, faced with a crisis that might last, Mr. Bini Smaghi would leave a little room to the ECB and apply a lower rate by 0.50 point to act later. Just in case.
"The ECB will be hard to lower the rate by 0.75 point, but it will be forced to resolve them," says Gilles Moëc however, an economist at Bank of America. "The recession in Europe is faster, deeper than the worst scenarios there are just two months", argue there. And to deal with this, to act quickly and decisively.
Brutally relax monetary policy helps to relieve a European economy in collapse accelerated. Where the unemployment rate rose to 7.7% in October, its highest level in almost two years. Where more than 12 million people are now unemployed. Where business confidence and consumer collapsed in November to its lowest level for twenty-three years.
"HELICOPTER BEN"
In addition, fears of inflation, which could slow so far the Central Bank in easing its monetary policy, vanish. Rising prices, which had exceeded 4% in early summer, fell to 2.1% annual rate. "Inflation is declining everywhere, including in Spain. That leaves the possibility for the ECB to lower its rates in an unusual way," says Moëc.
The gesture of the ECB would be exceptional, but still timid in the light of what is capable its American counterpart, the Fed. Having already implemented drastic rate cuts, the Federal Reserve said on Tuesday that it expected to raise up to $ 600 billion (473 billion euros) to buy the securities market of real estate credit and pay up 'to 200 billion dollars to enable institutional investors to buy bonds backed by assets such as auto loans, outstanding credit cards, credit and student loans to SMEs.
In other words, the Fed will run the board money. One way to create a exogenous money supply and thus counter the deflationary risks. Ben Bernanke, the current Fed chairman, had a day that the fight against deflation, it was enough to throw tickets by helicopter to the crowd. This earned him the nickname "Helicopter Ben". Daily Forex News And Tips / Make Money by Learning
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