The ECB’s Decision Continues To Prop Up The Euro


The regulator took the decision to maintain the key rate at its current level of 0.00%, as well as to maintain the volume of its asset purchasing program at its current level of 60bn EUR a month. ECB president, Mario Draghi, hinted that the bank would provide more details on its plans for the asset purchasing program at the next meeting in October. Still, he stressed that they key interest rate would remain at its current level at least until the asset purchasing program has come to an end.

In my opinion, maintaining an ultra-loose monetary policy will stimulate economic growth in the Eurozone and, accordingly, provide support for the single currency. At the moment, I can’t see any negative factors for the euro in terms of the ECB’s current monetary policy. The European economy is not currently at risk of overheating. Personal consumption continues to grow thanks to a rise in employment. 6 million new jobs have been created in the Eurozone since the start of 2013. A rise in business investments is also expected thanks to a rise in corporate profits from European companies.

The euro’s rise has not yet resulted in reduced exports. The Eurozone’s financial situation is still stable, with the annual growth rate of loans to non-financial corporations hitting 2.4% in July. So, one could come to the conclusion that the “expensive” euro has yet to have a negative impact on the European economy, and the ultra-loose monetary policy in place poses no risk to the Eurozone’s financial stability. I think that the ECB’s chosen course in terms of monetary policy, as well as the region’s stable economic growth, will continue to have a positive impact on the economy and on euro exchange rates.

 

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