- ECB President sees more stimulus amidst weak inflation
- It prompted U.S. president tweet who shares his displeasure, saying its effect made Europe more competitive with America
- This is the perfect storm for Bitcoin
- European Central Bank President Mario Draghi said Tuesday that ECB policymakers would consider in the coming weeks, how to adapt their policy tools. The options include a reduction in the already negative policy or extend the time frame before the next interest-rate increase.
Now, the policy makers of ECB are anticipating using an interest rate cut as the stimulus to boost inflation. ECB is one of five central banks with already negative rates and lowering borrowing costs further below zero is likely the initial step, said the officials.
During the institution’s annual forum at Sintra, Portugal, ECB president said that “additional stimulus will be required” if the economic outlook doesn’t improve. He added that further cuts remain
“part of our tools.”
In the light of Draghi’s comments, investors have brought forward their expectations with Commerzbank AG predicting such a policy step in July while JPMorgan Chase expects a rate cut in September now.
“Draghi is going to finish his tenure with a cut,” said Claus Vistesen, a chief euro-zone economist at Pantheon Macroeconomics. “The door is now open and I don’t see how they can not walk through it.”
Draghi will be leaving office this October as the only ECB President never to have raised interest rates.
The euro fell on Draghi’s comments while German 10-year bonds jumped. ECB staff sees inflation reaching only 1.6% in 2020 versus its goal of under 2%.
“If the crisis has shown anything, it is that we will use all the flexibility within our mandate to fulfill our mandate. And we will do so again to answer any challenges to price stability in the future,”
Draghi said Tuesday.
Trump Tweets, Accuses ECB of Currency Manipulation
This led US President Donald Trump to accuse Mario Draghi of “unfairly” manipulating the euro after the latter made dovish comments.
“Mario Draghi just announced more stimulus could come, which immediately dropped the euro against the dollar, making it unfairly easier for them to compete against the USA,” Trump wrote on Twitter. “They have been getting away with this for years, along with China and others.”
Trump further commented on the rise in European share price,
“German DAX way up due to stimulus remarks from Mario Draghi. Very unfair to the United States!”
ECB President struck back, saying they are simply fulfilling its mandate.
“We have our remit, we have our mandate . . . defined as [targeting] a rate of inflation close but below 2 percent over the medium term,” he said. “We are ready to use all the instruments that are necessary to fulfill this mandate and we can’t target the exchange rate.”
The US Federal Reserve is also prepared to discuss whether to cut interest rates in response to the hit the growth has taken from the global trade war. Officials are due to announce their decision on Wednesday.
Trump has expressed a clear preference for a rate cut, saying last week that central bank was
“very disruptive to us.”
Perfect Storm for Bitcoin
These rate cuts and more QE will act as the trigger for Bitcoin bulls as pointed out by Morgan Creek Digital’s Anthony Pompliano who tweeted,
“European Central Bank President Mario Draghi just I hinted at new interest rate cuts and more QE. Add in the May 2020 Bitcoin halving and you have the perfect storm.”
Bitcoin, Pomp explain is the perfect hedge against things like interest cuts and QE. These factors are responsible for global instability that Bitcoin benefits from because
“people ultimately trust transparent algorithms over emotional, biased and undisciplined humans.”
With the central banks and governments cutting rates and printing more money, it is making Bitcoin even more scarce in the process.
“Long Bitcoin, Short the Bankers.”
- Source: First Appeared Here
- Published Time: 2019-06-19 16:36:58
The views and opinions expressed in the article European Central Bank Signals Possible Rate Cut, Yet Another Bullish Storm for Bitcoin (BTC) do not reflect that of 48coins, nor of its originally published source. Article does not constitute financial advice. Kindly proceed with caution and always do your own research.
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