ECB is willing to cut interest rates and restart buying bonds

The ECB president said that continuing to cut interest rates is still on the list of tools that can be considered by ECB and the possibility of restarting the bond purchase program is “significant.”

European Central Bank President (ECB) Mario Draghi announced that the bank is ready to cut interest rates and restart the bond purchase program to support the economy if necessary.

Speaking at the ECB conference in Sintra, Portugal, Mr Draghi said continuing to cut interest rates was still on the list of tools that could be considered by ECB and added the possibility of restarting the chapter. The process of buying bonds is “significant.”

Buying bonds (quantitative easing) will help ECB inject new money directly into the financial system in the hope of boosting lending and economic development activities.

This possibility was mentioned only six months after the ECB ended the program to buy bonds worth 2,600 billion euros (2,900 billion USD), helping inject money into the financial system of the Common European Area (Eurozone) in nearly 4 years, to raise the inflation index to a higher level.

Currently, the inflation rate in Eurozone is 1.2%, lower than the 2% target set by the ECB and considered to be the best with the economy of this region.

The prospects for economic growth in the region are also suppressed by uncertainties such as US-China trade tensions, which could be seen as a possible increase in taxes and trade exchanges.

In addition, the process of leaving the European Union (EU) disorder is also a significant factor.

Mr. Draghi said that if the inflation index is not more positive, the stimulus measures are something to consider and stressed that ECB will find ways in its powers to push the inflation index to the target level.

ECB is a bank that sets monetary policy for 19 EU countries that have joined Eurozone.

The ECB often adjusts basic interest rates and, if necessary, uses financial instruments to achieve the inflation target.

ECB actions have a broad impact on consumer spending, the financial situation of banks, businesses and governments.

The interest rate cut will make borrowing costs cheaper, but also means lower deposit rates.

Meanwhile, the use of monetary stimulus measures will cause the prices of assets such as stocks and bonds to increase but make the exchange rate against the US dollar lower.

The statement was immediately evaluated by the market as a sign of the possibility that measures will soon be taken within the next few months and caused the value of the euro against the dollar to fall from 1 euro to 1.1241 USD. $ 1.1189.

The ECB’s move to support monetary stimulus measures is quite similar to the current view of the Federal Reserve Bank (Fed).

Fed recently stopped a series of interest rate hikes.

Fed President Jerome Powell once said the bank was prepared for the US-China trade tension that threatened the US economy. Investors say these statements are a sign that the Fed may cut interest rates this year.

However, ECB plans are not accepted by US President Donald Trump.

Donald Trump criticized the ECB “floating” on the use of monetary stimulus measures, helping the EU to compete more “unfairly” than the US.

Sharing on Twitter, the US president said that Mario Draghi’s announcement of the possibility of using monetary stimulus measures immediately to reduce the value of the euro against the US dollar and help the EU to compete easily “in any way. work “with the US.

After the market reacted positively to the comments of ECB leaders, Mr. Donald Trump also immediately shared “European financial markets rose after comments (unfair to the US) of Mr. Mario D. “

Since coming to power in 2016, Mr. Trump has pursued a policy of “proactively” declaring war on every action allegedly “taking advantage of the US” from global trading partners.

Source: Vietnam News Agency