The European Policy Maker of the Central Bank (ECB), Madice Muller, explained on Friday that their decision to reduce the main prices by 25 basis points at the Policy meeting in April was supported by lower energy and tariff prices.
Muller also added that the policy rates are no longer restricted to economic activity in the eurozone, adding that the main indicators of the European Central Bank are moving in the right direction. Finally, he said that the most fragmented global economy can increase prices.
Market reaction
EUR/USD did not show any immediate reaction to these comments and the last time was seen in trading unchanged a day at 1.1368.
Common questions about the European Central Bank
The European Central Bank (ECB) in Frankfurt, Germany, is the backup bank. The European Central Bank places interest rates and runs the region’s monetary policy. The state of the European Central Bank is to maintain price stability, which means maintaining inflation by approximately 2 %. Its primary performance is by raising or lowering interest rates. Relatively high interest rates usually lead to the most powerful euro and vice versa. The Board of Directors of the European Central Bank is making monetary policy decisions at eight times a year. Decisions are made by the heads of national banks in the eurozone and six permanent members, including the President of the European Central Bank, Christine Lagarde.
In maximum situations, the European Central Bank can enact a policy tool called quantitative mitigation. QE is the process that the European Central Bank prints and uses to buy assets – usually government or companies – from banks and other financial institutions. QE usually leads to the weakest euro. Ken is the last resort when it is unlikely to achieve interest rates simply the goal of stabilizing prices. The European Central Bank used it during the great financial crisis in 2009-11, in 2015 when inflation remained stubborn, as well as during the roaming epidemic.
The quantitative tightening (QT) is the opposite of QE. It is implemented after QE when the economic recovery is ongoing and inflation begins to rise. While in QE, the European Central Bank (ECB) purchases government bonds and companies from financial institutions to provide them with liquidity, in QT, the European Central Bank stops buying more bonds, and stops investing the manager on the bonds that he already holds. It is usually positive (or bullish) for the euro.
