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The European Central Bank (ECB) Governing Council member Robert Holzmann said on Friday that it would be wrong for the ECB to cut interest rates with the sole purpose of boosting the economy,  per Bloomberg. Key quotes It isn’t the job of the ECB to boost the economy, the job of the ECB is price stability. To lower rates now to crank up the economy would run contrary to our stance. Market reaction At the press time, the EUR/USD pair was up 0.09% on the day to trade at 1.0506. ECB FAQs The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy for the region. The ECB primary mandate is to maintain price stability, which means keeping inflation at around 2%. Its primary tool for achieving this is by raising or lowering interest rates. Relatively high interest rates will usually result in a stronger Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde. In extreme situations, the European Central Bank can enact a policy tool called Quantitative Easing. QE is the process by which the ECB prints Euros and uses them to buy assets – usually government or corporate bonds – from banks and other financial institutions. QE usually results in a weaker Euro. QE is a last resort when simply lowering interest rates is unlikely to achieve the objective of price stability. The ECB used it during the Great Financial Crisis in 2009-11, in 2015 when inflation remained stubbornly low, as well as during the covid pandemic. Quantitative tightening (QT) is the reverse of QE. It…

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Filed under: News - @ December 16, 2024 12:22 am