Market Overview

22 November 2019

ECB interest rates short-term change unlikely, unconventional stimulus could dominate

A new European Central Bank president Christine Lagarde confirmed she would start a strategic review of ECB’s monetary policy to bolster economic growth and bring the euro area inflation closer to a 2% target. She reiterated that ECB’s accommodative policy is a key element in supporting domestic demand that should be addressed by all European nations’ institutions as a major driver for economic development.

Unfinished monetary and policy union in EU, internal ECB’s limits for Quantitive Easing programme requires a new unconventional, more political measures to reshape growth in Europe. Calling for more public investments in euro area Lagarde advocates the government borrowings to be relocated towards economy stimulus. This is the right pressure point where Mrs. Lagarde political experience as former Managing Director of International Monetary Fund and a French finance minister is most valuable.

The exciting point of her speech on Friday is a support extended to complete the single digital market and the capital market union in Europe. The support of European financial integrity displayed by ECB President could help to move on with European banking union that is promoted by Germany. This is in line with ECB’s efforts to clean up banking system in euro area via mergers and acquisitions that may allow exploit economies of scale and scope.

Christine Lagarde at her first speech performed herself an experienced communicator to the markets waving off concerns about her preferences to listen to the trade unions, consumers’ associations, NGOs rather than being well understood by investors. In addition, she presented herself as a wise independent politician that could offer a solution rather to allow pressure on monetary policy.

Unconventional measures

A point to embrace innovation and capitalize on the digital age could highlight the framework of unconventional measures the ECB could perform not only to the banking system in euro zone but to cope with non-bank financial institutions that are playing an increasingly important role in financing the euro area economy, especially through their sizeable investments in bonds issued by euro area non-financial corporations. Those institutions are facing similar challenges to banks with profitability being one of the major concerns too. Another source of concern is the elevated exposure of non-banks to highly indebted segments of the corporate sector. This will require ECB to develop a macroprudential framework for such financial institutions to diminish risks and vulnerabilities.

Further unconventional measures could involve an indirect financing in euro area to support internal demand. Such indirect financing could be introduced via digital currency centralized at the ECB level or euro area central banks level under supervision of European monetary policymaker. This could allow every EU resident to have a digital money account with the central bank and to inject further financial stimulus to Europe’s economy gearing up inflation.


Analysis and opinions provided herein are intended solely for informational and educational purposes and don't represent a recommendation or investment advice by TeleTrade.

Indiscriminate reliance on illustrative or informational materials may lead to losses.

Open Forex Demo Account
I understand and accept the Privacy Policy and agree that my name and contact details can be used by TeleTrade to contact me about the information I have selected.
37 International Awards
Have a question?

We are ready to assist you in every step of your trading experience
by providing 24/5 multilingual customer support.

Follow us

Risk Warning: Trading Forex and CFDs on margin carries a high level of risk and may not be suitable for all investors. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Prior to trading, you should take into consideration your level of experience and financial situation. TeleTrade strives to provide you with all the necessary information and protective measures, but, if the risks seem still unclear to you, please seek independent advice.

© 2011-2020 TeleTrade-DJ International Consulting Ltd

TeleTrade-DJ International Consulting Ltd is registered as a Cyprus Investment Firm (CIF) under registration number HE272810 and is licensed by the Cyprus Securities and Exchange Commission (CySEC) under license number 158/11.

The company operates in accordance with Markets in Financial Instruments Directive (MiFID).

The content on this website is for information purposes only. All the services and information provided have been obtained from sources deemed to be reliable. TeleTrade-DJ International Consulting Ltd ("TeleTrade") and/or any third-party information providers provide the services and information without warranty of any kind. By using this information and services you agree that under no circumstances shall TeleTrade have any liability to any person or entity for any loss or damage in whole or part caused by reliance on such information and services.

TeleTrade cooperates exclusively with regulated financial institutions for the safekeeping of clients' funds. Please see the entire list of banks and payment service providers entrusted with the handling of clients' funds.

Please read our full Terms of Use.

To maximise our visitors' browsing experience, TeleTrade uses cookies in our web services. By continuing to browse this site you agree to our use of cookies. You may change your cookie consent or view our cookie declaration here.

TeleTrade-DJ International Consulting Ltd currently provides its services on a cross-border basis, within EEA states (except Belgium) under the MiFID passporting regime, and in selected 3rd countries. TeleTrade does not provide its services to residents or nationals of the USA.

Material posted here is solely for information purposes and reliance on this may lead to losses. Past performances are not a reliable indicator of future results. Please read our full disclaimer.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.