Economists react to ECB rate cuts

“Following the adverse reaction to previous measures in December and in light of the growing downside risks to economic recovery, the ECB Governing Council appears to have recognized the importance of not under-delivering again,” Capital Economics analyst Jonathan Loynes said Thursday shortly after the eurozone’s central bank announced three rate cuts and a boost to its asset-purchasing program.

His view was echoed by Craig Erlam, a senior market analyst at Oanda. He said: “The central bank came out all guns blazing on Thursday.”

Berenberg Bank economist Holger Schmieding argued the ECB package of new measures “exceeds expectations by enough to have a positive confidence impact not just on financial markets, but also on business confidence in the eurozone.

A catastrophe for savers?

But not everyone seemed convinced the new ECB measures would do any good.

DZ Bank economist Jan Holthusen said the move would do little to push up inflation in a sustainable manner. He noted that the inflation rate was much more dependent on crude oil prices “which are beyond the ECB’s influence.”

“The central bank is taking the risk to do too much of a good thing,” Holthusen added.

The president of Germany’s BGA trade organization, Anton Börner, called the ECB announcement “good news for stock traders and indebted southern eurozone nations.” Those countries would now feel even less inclined to push through necessary reforms, he said.

He added the move was “a catastrophe for Germans,” saying that savers in Europe’s largest economy were being expropriated. Börner said this had “the potential of turning into a very explosive situation.

hg/cjc (Reuters, AFP, AP)

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