Draghi cuts Euro rates to -0.2%, US non-farm payroll out today
Against market expectations, although there were rumours, Mario Draghi cut interest rates in the Eurozone to -0.20% in an effort to stimulate the flagging economy.
So why did he do this?
This has to be the last throw of the dice for this sort of intervention, as where else can we go from here? Inflation is lagging at 0.3%, a fair distance away from the 2% goal and price expectations are also worsening. Even lower interest rates should encourage companies and households to spend money as opposed to save and get more money moving around.
As expected, there was also a plan to buy asset-based securities, although the exact amount was not announced. This is also based on the hope of having more money swirling around the economy. This, combined with no announcement regarding quantitative easing, points to the probability that Draghi does not have a large enough majority to launch this method at the moment.
Inflation and growth expectations were also cut in the Eurozone.
BoE keeps rates on hold
Expectedly, the Bank of England kept interest rates on hold as the Pound benefited from weakness but lost out against the US Dollar.
Coincidentally, today’s main event is the non-farm payroll from the US. This is far more important than anything else.