"We are ready and able to act. We are monitoring developments closely and are ready to consider all available instruments."
- Mario Draghi, ECB President
Despite stronger-than-expected data from the United States, which is suggesting the Fed could soon begin tapering its stimulus programme, the single currency managed to climb to 1.3677 last week, hitting the highest since October. The Euro benefitted from the ECB's decision to leave the policy unchanged, and Mario Draghi's comments that policymakers are not planning to introduce fresh stimulus. But with interest rates already close to zero and little signs of improvement in the Eurozone, what else is left in the ECB's store if inflation stays subdued in 2014?
After holding fire following November's surprise rate cut, Draghi said European authorities debated pushing the so-called deposit rate into negative territory and were considering any fresh long-term loans to domestic banks, suggesting loans will be tied to banks along with the funds to businesses and households. It is vital to remain vigilant for the ECB, as the latest forecasts showed inflationary pressure will be holding well below the 2% target through 2015.
At the same time, the U.S Economics professor Barry Eichengreen pointed out the ECB should fight weak inflation with the U.S.-style bond-buying programme. Moreover, they should follow the Fed in buying bonds and emulating the BoE's programmes to assure stable lending to small and medium-sized companies.
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