The Dow Jones industrial average fell 113.75 points, or 0.63 per cent, to 17,982.52, the S&P 500 lost 10.92 points, or 0.52 per cent, to 2,091.48 and the Nasdaq Composite dropped 2.24 points, or 0.05 per cent, to 4,945.89. “We obey the law, not the politicians because we’re independent”.
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There is no doubt that low interest rates will result in low returns for savers in the Euro area.
German Finance Minister Wolfgang Schaeuble has been unusually frank about his displeasure over zero interest rates, suggesting they were helping foment political unrest in Germany and aiding the rise of an anti-euro, anti-immigrant party, the AfD.
“We have a mandate for the whole eurozone, not just Germany”, Mr. Draghi said after the ECB’s policy meeting.
Draghi warned that those who threatened European Central Bank independence with “criticisms of a certain type” were making Europe’s economic problems worse.
The European Union treaty that created the ECB and the euro forbids the central bank from taking advice from governments, and says that member governments agree to respect that.
If you look at the facts, for Germany to lay into the European Central Bank makes little sense.
The bank did not change the measures that have caused controversy.
He made the remark after the bank chose to leave interest key interest rates at zero or below.
The main refinancing rate, at which it lends to banks, was kept unchanged at 0.00 per cent and the rate on the marginal lending facility the overnight borrowing rate for banks – at 0.25 per cent. [U/S] The yield on benchmark 10-year Treasury notes stood at 1.866 percent in Asian trade, compared to its US close of 1.870 percent on Thursday. In the year to March, inflation was flat.
Purchases of the euro-denominated securities will be carried out by six national banks in the primary and secondary bond markets, according to the statement.The programme will include non-bank companies, even where those entities own a bank, Mr Draghi said.
He said that the governing council, “if warranted to achieve its objective, will act by using all the instruments available within its mandate”. He was again forceful in his rhetoric over the need to combat inflation being too low adding that it is critical to ensure that very low inflation does not become entrenched.
If this wasn’t obvious before, it should be after Chancellor Angela Merkel herself came out on Thursday, hours after Draghi spoke, and declared the German debate over the ECB’s low interest rate policies “legitimate”.
The ECB is already buying 80 billion euros ($91 billion) in bonds from banks each month through at least March 2017.
The central bank is also looking to grant commercial banks long-term loans which will yield negative interest rates.
“While keeping its options open today, the ECB is clearly waiting to see the impact of last month’s policy measures before reassessing the policy stance”, said Berenberg Bank economist Kallum Pickering.
What matters in the eurozone is important for the world economy.
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The ECB-Germany controversy comes as prospect for the eurozone economy are still uncertain, with a limited recovery and doubts about the effect of the “bazooka” measures taken by the central bank.
