"The Governing Council strongly emphasizes that it will maintain an accommodative stance of monetary policy for as long as necessary"
- Mario Draghi, ECB President
The 2014 year so far definitely cannot be considered as a ‘good year' for the Euro, as the single currency was strongly undermined by the ECB comments and other data, falling to its lowest level in one month against the U.S. Dollar hitting 1.3548 on Thursday.
As it was widely expected the European Central Bank refrained from any additional stimulus measures, leaving its key refinancing rate at a record-low of 0.25%. The ECB President Mario Draghi pointed out that borrowing costs can remain at present or even lower levels for an extended period of time. It was not a surprise as well that Draghi pledged to act if necessary, as last year his comments inspired investors all over the world and diminished the possibility of a breakup. There are two contingencies the ECB is likely to act further– an unwarranted tightening of short-term money markets as well as gloomy medium-term inflation outlook for the region. Inflationary pressure slowed to 0.8% in December, moving further away from its threshold level of 2%. While a possibility the ECB will be forced to pull the trigger are rather high, it is still unclear on which tools it will use. During Thursday's meeting Draghi said they will not hesitate to use all tools allowed by the law. Meanwhile, negative deposit rate is likely to effectively charge banks for storing their money at the central bank and instead pushing them to invest it into the real economy.
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