At the February ECB meeting the new piece of information was worries over Emerging Markets and whether this was temporary or permanent. But ahead of the March ECB meeting today a new worry has arrived in the form of geopolitical concerns surrounding Ukraine. The key role that Ukraine plays in the supply of oil and gas to the rest of Europe has already seen higher oil and gas prices. <p>
These are early days but it seems perfectly reasonable that the ECB may once again opt to wait for more information before deciding on a course of radical action to combat disinflationary/deflationary pressures in the Eurozone. Expectations for easing are not strong and largely sideways inflation since November provide little urgency allowing the ECB to wait a while longer before considering any further rate changes. <p>
However, the central bank is set to enhance excess market liquidity by ending so-called “sterilisation” of the bond purchases under its Securities Markets Programme (SMP). <p>
<b>The resultant release of around €175bn would roughly double the amount of excess liquidity in the Eurozone financial system, help bring down interbank lending rates and could also lower the euro’s exchange rate against the dollar.
<p><h5>Alan McQuaid</h5>
Disclaimer: www.merrion-capital.com/disclaimer
Merrion Stockbrokers Limited (registration no. 307878)
is a limited liability company whose registered office is at
Block C, The Sweepstakes Centre, Ballsbridge, Dublin 4, Ireland.