ECB Hints at Possible Stimulus in 2015
Comments by the European Central Bank leader indicate that some sort of stimulus package is possible next year in January. According to an article in Reuters, new forecasts by the ECB predict just 1% growth next year instead of the 1.6% that was expected just 3 months ago. (Source: Reuters: 12/04/2014)
Inflation is seen at 0.7% for next year which is well below the 2% target. Because of lowered forecasts for both growth and inflation markets look as though the ECB will confirm a new round of stimulus some time early next year.
Major European stock indexes are all trading much higher Friday as the German DAX has rallied above the 10,000 mark for the first time in months. France’s CAC 40 and the UK’s FTSE 100 have posted nice gains along with the indexes in Spain and Italy. So it looks as though market participants are expecting more intervention from the ECB next month.
Will Draghi Move Forward Without German Support?
The ECB head defended a stimulus program saying that "QE has been shown to be effective in the United States and UK”. His comments also suggested that there is no need for all 18 Euro Currency countries to agree on a QE package.
He went on to say that "Do we need to have unanimity to proceed on QE or can we have a majority? I think we don't need unanimity," (Source: Reuters 12/04/2014) So it appears that he may have been proactively delivering a message to Germany that he will proceed without their support if need be.
Germany with the largest and strongest economy in the region likely fears a full blown QE program will only increase borrowing and fuel inflation at some point.
No Gold Purchases From ECB
In an article on Yahoo a couple of weeks ago it was speculated that the ECB would possibly consider buying Gold as one of its unconventional monetary policy measures. (Source: Yahoo Finance 11/18/2014).
This week Draghi ruled out Gold buying in any future asset purchases by the Central Bank. When asked what form QE should take his response was “On what sorts of assets should be included in QE... we discussed all assets BUT gold" ( Source: ZeroHedge 12/04/2014)
What is so interesting about his comments are how he mentioned Gold without being directly asked about it. Gold has received a lot of attention recently with the Swiss vote, the Netherlands repatriation and the possible French repatriation. The last thing that the ECB head wants to do is promote Gold in any way, which is likely why he singled it out.
Even without the direct support of the ECB, prolonged QE will ultimately be the reason why Gold prices will eventually be much higher.
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