ECB Stays Put But Opens The Door For Easing Next Month
The euro was steady at $1.3702 to end the week after the European Central Bank met expectations on Thursday and maintained its key interest rate of 0.25 percent.
However, the common currency is likely to continue weakening as speculation grows that the bank could start easing as soon as next month.
The Wall Street Journal reported that ECB President Mario Draghi was using uncharacteristically aggressive language as he reassured investors that the bank was planning to continue with its easy-money policies and was prepared to ease further if needed.
In his press conference following the meeting, Draghi confirmed that the region's central bankers had discussed the possibility of using a negative deposit rate or a large-scale bond purchasing program in order to inject funds into the eurozone's financial system.
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Eurozone inflation is becoming a worry as it fell even further below the bank's two percent target to 0.05 percent in March. The worryingly low figure has put pressure on the ECB to make a move to keep the region from slipping into a period of deflation.
However, Draghi played March's low inflation figure off by saying there could be several factors affecting the number. One such factor is the fact that Easter holidays fall later in the year, so price increases for holiday related travel won't be incurred until April this year. For that reason, Draghi said, the bank is waiting for further evidence that last month's disappointing inflation reading isn't a fluke.
Because the ECB is putting off action on the grounds that March's inflation figure could be an inaccurate representation of the bloc's actual inflation rate, April's inflation data will be closely watched. Most expect that the bank will use the new numbers to decide whether or not to step in next month.
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