The euro is under pressure early Thursday morning ahead of the European Central Bank’s monetary policy meeting that is expected to offer some additional easing measures for the economies in the 19 member euro currency bloc.
Inflation is still low in the euro area and remains well below the ECB’s inflation target of close to 2 percent.
According to Euro stat, consumer prices in the 19 member euro area turned negative for the first time in 5 months and declined -0.2 percent year over year in February after rising +0.3 percent in January.
During today’s monetary policy meeting, the market expects the ECB to make a deposit rate cut of at least 10 basis points from – .30 to -.40 percent.
The deposit rate is the amount the ECB charges banks to park money overnight at the ECB.
Several other countries including Denmark, Japan (-.10), Sweden, and Switzerland (-1.25) have adopted monetary policies of negative rates.
One additional measure that the ECB could adopt on Thursday is a new commitment to undertake another Long Term Refinancing Operation (LTRO) f or euro area banks.
LTRO’s have been around for some time and were used during the euro debt crisis to ensure that banks had enough liquidity to offer loans.
Under an LTRO, the ECB offers cheap loans to euro area banks set for a specified duration.
Quantitative Easing (QE)
Another possibility is that the ECB could increase their quantitative easing program by €10 to 20 billion with their monthly asset purchases.
The ECB is already committed to purchasing € 60 billion in monthly assets (bonds) and extended their quantitative easing program from September 2016 to March 2017 or beyond.
For more analysis and commentary about the ECB’s decision, please view the You Tube video where I shared some more information about the ECB’s upcoming decision.