Additional ECB measures if recovery stagnates

Additional ECB measures if recovery stagnates

09-22-2009 13:04

Ivan Sramko, governor of the central bank of Slovakia (NBS) and council member of the European Central Bank (ECB) stated that the ECB will take further steps to stimulate the economy if the improvement stagnates. South Africa’s currency pared the losses that it made earlier this Tuesday’s trading session as speculations indicate that the national interest rates will be maintained, alluring investors to inject in South African assets.

Additional ECB measures

“There remain numerous uncertainties concerning the nature of the economic recovery and central banks and the ECB will take additional measures in order to create a stable real economy and stable financial markets if the recovery falters. Clearly, additional measures will be taken if necessary,” Sramko said.

Record low of 1%

The European Central Bank, headquartered in Frankfurt, has reduced its benchmark interest rate to an unprecedented low of 1% and offers banks inexpensive cash in order to pull the Eurozone economy out of the most intense slump since the Second World War. Worldwide trade is recovering and administration stimuli boost domestic spending, which may result in economic growth this quarter.
“It remains unclear how the economy will develop after the stimulus programs expire,” Sramko stated. According to the European Central Bank “there are both many positive and negative factors that can influence the economic recovery,” the ECB council member commented.

Upgraded forecasts

On 3 September, the European Central Bank upgraded its economic predictions regarding the Eurozone, which resulted in an economic expansion of approximately 0.2% for the next year from the previous forecast that projected a 0.3% decline. This year, the economy will contract by approximately 4.1%, instead of the 4.6% shrink forecasted previously. The economic forecasts show that inflation will average 0.4% in 2009 and 1.2% next year, while the ECB target is below 2%. Ivan Sramko stated: “The projections remain well below the target and they don’t indicate that inflation may accelerate thus far.”

Rand up

This Tuesday, the South African Rand rose against all currencies that climbed versus the Greenback, with exception of the Romanian currency. This was the result of speculations suggesting that South African interest rates will be maintained, while inflation numbers in the nation are still weak, on which the national currency became one of the highest yielding currencies in the Forex market.