FXTM information and reviews
FXTM
93%
IronFX information and reviews
IronFX
92%
Libertex information and reviews
Libertex
91%
FXCC information and reviews
FXCC
90%
Markets.com information and reviews
Markets.com
89%
FxPro information and reviews
FxPro
88%
EUR/USD
1.1729
BTC/USD
43 862.55
GBP/USD
1.3655
USD/JPY
109.4070
USD/CHF
0.9272
USD/CAD
1.2836
EUR/JPY
128.3269

Speculation for TLTRO Plans Rises


6 March 2019

The European Central Bank will be holding its monetary policy meeting this week on Thursday. This will mark the second meeting this year. Expectations are for the ECB to start laying out plans for relaunching the Targeted Long Term Refinancing Operations, or TLTRO for short.

This speculation comes amid a prolonged weak patch of economic data. While headline inflation has been near the ECB’s 2.0% target rate, it has since eased back.

The Data


At the latest reading, the final inflation for January came in at 1.5%. Core inflation, seen by the ECB as a better measure of inflation as it excludes the volatile food and energy prices, stayed stubbornly near the 1.1% level.

This comes as the ECB ended its QE program in December 2018. While there is speculation that the ECB could turn dovish, some economists have said that that the central bank should respond to the slowdown by raising interest rates.

This seems counterintuitive compared to general expectations. ECB watchers have noted that the prolonged negative rates implemented since June 2014 could start to self defeat the purpose as banks continue to struggle to pass this on to depositors.

As a result, some circles of economists note that this could eventually curb credit and lending processes. This could remove further liquidity from the markets. And, of course, this could be detrimental to economic growth.

The counter advice further notes that the central bank should remove the tax on bank profits. It also suggests issuing a new round of cheap loans under the guise of the TLTRO program.

The Speculation


The speculation on what the ECB could do has started ahead of the March 7th meeting. Previous central bank meeting minutes have shown that the ECB’s governing council has been speculating on initiating the TLTRO program.

This thought was further given weight when the ECB governing council member, Benoit Couere mentioned a few weeks ago that the central bank should start considering this option seriously. Couere’s comments initially sent the euro falling.

At the same time, some economists argue that the decision to relaunch the TLTRO program could essentially render the ECB’s decision to end its QE program a mistake.

Some sides of the argument note that the ECB should lift the deposit rate which is currently at -0.4% to 0%. They suggest that the ECB also give strong forward guidance tilting on the hawkish side of the scale.

Economists note that by committing to keeping interest rates at zero, it would essentially ease the pressure of the European banks. They claim it could help the banking sector pass on the current monetary policy conditions into the real economy.

Such a decision could, of course, have other effects. This is especially true as some peripheral central banks in the European Union have started to signal that interest rates will rise from the current low levels.

One of the latest central banks to join the hawkish club was Sweden’s Riksbank. The bank recently hiked rates and forecast another rate hike during the year.

Economic Situation


Meanwhile, economic conditions continue to plague the eurozone. While for the moment, the threat of Washington imposing higher tariffs on German imports has subsided, there is no telling when Trump will start to put pressure again.

The trade talks with China have been progressing so far, with the latest developments indicating that there could be a positive outcome. President Trump pushed back the deadline of March end. This avoided the automatic hike in tariffs on Chinese goods imported to the United States.

Global trade has also been slowing which has been another concern for the eurozone. However, if the clouds of uncertainty pass over, especially in regards to the U.S. China trade talks, we could start to see some progress in trade, particularly in the eurozone.


Related

Forex and Cryptocurrency Forecast for September 20-24, 2021
Forex and Cryptocurrency Forecast for September 20-24, 2021

The dollar continues to strengthen, and the EUR/USD pair moves south. Starting on Monday September 13 at 1.1810, it ends the five-day run at 1.1730. The movement...

20 Sep 2021

Gold and Silver looking into the abyss
Gold and Silver looking into the abyss

Strong US data revived bets on an imminent QE rollback from the Fed, supporting the dollar and causing bond yields to rise. The news triggered a more than 2% plunge in gold prices...

17 Sep 2021

Stocks pick up some bid after textbook SP 500 bounce
Stocks pick up some bid after textbook SP 500 bounce

European stock markets were modestly higher on Thursday after a rebound in the US and another dip for Asian equities overnight. Hong Kong down 1.7%...

16 Sep 2021

Stock Futures Trade Lower, Investors Worry About Fed Tapering
Stock Futures Trade Lower, Investors Worry About Fed Tapering

US and European futures are trading lower today, following a retracement in US indices. The Dow Jones Industrial Average fell nearly 290 points, wiping out gains...

15 Sep 2021

Futures in the United States and Europe are up today
Futures in the United States and Europe are up today

Futures in the United States and Europe are up today after the Dow managed to gain nearly 260 points and break its five-day losing streak. Although investors...

14 Sep 2021

Forex and Cryptocurrency Forecast for September 13-17, 2021
Forex and Cryptocurrency Forecast for September 13-17, 2021

The ECB meeting on Thursday 09 September went off as expected with no surprises. The interest rate remained unchanged at 0%. The European regulator...

13 Sep 2021


Editors' Picks

OctaFX information and reviews
OctaFX
86%
HotForex information and reviews
HotForex
85%
XM information and reviews
XM
80%
FXCM information and reviews
FXCM
79%
Vantage FX information and reviews
Vantage FX
78%
Moneta Markets information and reviews
Moneta Markets
77%

© 2006-2021 Forex-Ratings.com

The usage of this website constitutes acceptance of the following legal information.
Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website (reviews, brokers' news, comments, analysis, quotes, forecasts or other information materials provided by Forex Ratings, as well as information provided by the partners), including graphical information about the forex companies, brokers and dealing desks, is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Forex Ratings shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about the forex companies. The entire responsibility for the contents rests with the commentators. Reprint of the materials is available only with the permission of the editorial staff.
We use cookies to improve your experience and to make your stay with us more comfortable. By using Forex-Ratings.com website you agree to the cookies policy.