Saturday 5 December 2015

How far can the ECB take its actions?

Mario Draghi has stated that the ECB will take any necessary action to hit its target without limits. However, we need to know "no limit" does not mean no limit, as the ECB needs to ensure that the Eurozone economy is recovered without causing the collapse of the currency union. Moreover, it is a central bank by definition. It cannot use any stimulus tools beyond the function of any other central banks. Moreover, all member countries have their governments who are making all different fiscal decisions, and these decisions may limit the effects of the ECB's policies. The move of setting negative base rates is already very radical; I think more radical moves might damage the currency union.

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