| | | Unconventional Monetary Policies Should be Met with Unconventional Fiscal Measures | | The European Central Bank (ECB) proceeded with its unconventional monetary easing measures by cutting already negative key interest rates by another 10 basis points to -0.5 percent earlier this month. Further, the ECB announced it would restart the quantitative easing strategy, buying government bonds or other assets to inject liquidity into the economy, with a €20 billion purchase of bonds monthly beginning in November. These moves run counter to what was predicted a year ago. Then, the ECB was expected to raise rates late in 2019. Now, the lack of inflationary pressures and weakness in the eurozone economy, particularly with negative growth in Germany, the area's anchor, prompted a further stimulus to their economies. | | In normal circumstances, additional monetary easing in a weak economic environment is quite welcomed. However, with heavier usage of these unconventional policy tools, there is a growing trend now where more ECB board members are vocally questioning the effectiveness of these policies and concerns of the possible negative side effects. These members include the Dutch central bank President Klaas Knot (writing on their national bank's website a day after the decision), Deutsche Bundesbank's Jens Weidmann (expressing his dissent in the Bild newspaper), and French and Austrian central bankers. | | Watch the video | | If we can help you with any Foreign Exchange needs, please email foreignexchange@cnb.com or call (800) 447‑4133. | | Want to learn more about international finance, economics, and global events? Sign up for our other Foreign Exchange emails and videos! | | | | | | | Follow City National Bank on social media: | | | | | | Non-deposit investment products: | | • | Are not FDIC insured, | | • | Are not deposits or other obligations of City National Bank and are not guaranteed by City National Bank, and | | • | Are subject to investment risks, including possible loss of the principal invested. | | | | | This report is for general information and education only and was compiled from data and sources believed to be reliable. City National Bank does not warrant that it is accurate or complete. Opinions expressed and estimates or projections given are those of the authors as of the date of the report with no obligation to update or notify of inaccuracy or change. This report is not a recommendation or an offer or solicitation to buy or sell any financial instrument discussed. It is not specific investment advice. Financial instruments discussed may not be suitable for the reader. Readers must make independent investment decisions based on their own investment objectives and financial situations. Prices and financial instruments discussed are subject to change without notice. Instruments denominated in a foreign currency are subject to exchange rate and other risks. City National Bank (and its clients or associated persons) may engage in transactions inconsistent with this report and may buy from or sell to clients or others the financial instruments discussed on a principal basis. Past performance is not an indication of future results. This report may not be reproduced, distributed or further published by any person without the written consent of City National Bank. Please cite source when quoting. | | | | | | |
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