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23 Jan 2015
ECB: QE comes with risk - Rabobank
FXStreet (Guatemala) - Jane Foley, Senior Currency Strategist at Rabobank explained that this decision by the ECB to launch QE comes amidst a huge degree of scepticism about the policy’s ability to inject fresh life into the Eurozone economy.
Key Quotes:
"The policy’s critics have suggested that with long term interest rates already so low in the region that a further incremental fall is unlikely to have much of an impact in boosting borrowing."
"Others have warned that the structural nature of unemployment in the Eurozone means that there is little room for the policy to have much feed through into labour markets and that governments need more than ever to take up the mantle of reform."
"The policy’s most vocal opponents have been warning that by pushing down bond yields and reducing debt maintenance costs, QE will actually remove the incentives of various Eurozone government to implemental structural reform and thus the long-term outlook for growth and coherence within EMU will remain blighted. The validity of these various criticisms will become clearer over time. For the present, the risks of a deflationary cycle are clearly viewed to be sufficiently urgent to overrule all of these concerns."
"By announcing QE, the ECB have taken a drastic policy move and for the time being at least ECB President Draghi is likely to feel satisfied that he has been able to engineer such a huge market impact particularly in the currency markets."
Key Quotes:
"The policy’s critics have suggested that with long term interest rates already so low in the region that a further incremental fall is unlikely to have much of an impact in boosting borrowing."
"Others have warned that the structural nature of unemployment in the Eurozone means that there is little room for the policy to have much feed through into labour markets and that governments need more than ever to take up the mantle of reform."
"The policy’s most vocal opponents have been warning that by pushing down bond yields and reducing debt maintenance costs, QE will actually remove the incentives of various Eurozone government to implemental structural reform and thus the long-term outlook for growth and coherence within EMU will remain blighted. The validity of these various criticisms will become clearer over time. For the present, the risks of a deflationary cycle are clearly viewed to be sufficiently urgent to overrule all of these concerns."
"By announcing QE, the ECB have taken a drastic policy move and for the time being at least ECB President Draghi is likely to feel satisfied that he has been able to engineer such a huge market impact particularly in the currency markets."