Super-Mario’s “More Inflation” Folly

The world financial system is surely in a pickle when Super-Mario Draghi disappoints the gamblers for being too hawkish!

After all, at Thursday’s meeting the ECB kept its marginal lending facility rate at 0.25% and its deposit facility rate at negative 0.4%; and it also said it would continue printing QE money at a EUR 15 billion monthly rate through December, while keeping short-term interest rates at essentially zero well into 2019.

That’s right. After nearly a decade of so-called recovery the ECB is still pinning the money market rate to the zero bound and buying euro government bonds like there is a financial DEFCON 1 in effect. And here’s why:

“The Governing Council anticipates that, subject to incoming data confirming the medium-term inflation outlook, net purchases will then end.”

That is, they are still trying to coax the requisite amount of inflation out of the European economy and are therefore prolonging emergency stimulus measures just to be sure. However, it was Draghi’s expression of confidence that the ECB has finally gotten inflation up to snuff that put the casino gamblers in a sour mood.

Indeed, he essentially warned the boys and girls in the euro equity markets that there will soon be “no more monetary sugar for you” because inflation is purportedly on a self-sustaining roll.



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