“You remember me saying that all instruments were on the table, ready to be used. Well, today we did it,” Draghi told a news conference.
The heads of the Bundesbank, Jens Weidmann, and the Banque de France, Francois Villeroy de Galhau, as well ECB board member Benoit Coeure, once seen as a key Draghi ally all disapproved of the decision, the sources, who asked not to be named, said. “They are trying, and succeeding, in depreciating the Euro against the VERY strong Dollar, hurting US exports.... And the Fed sits, and sits, and sits. They get paid to borrow money, while we are paying interest!” Trump tweeted.
“Today’s decisions have anchored and enshrined the Draghi legacy in future ECB decisions,” ING economist Carsten Brzeski said. The ECB’s decision triggered a rally in eurozone bonds that will cut the cost of borrowing across the 19 countries that use the euro. The single currency itself firmed a touch after wild price swings during Draghi’s news conference.A simple rate cut would have increased the cost to commercial banks of parking their more than €1-trillion worth of excess reserves safely at the ECB, a dangerous move since banks transmit the bulk of its policy to the real economy.
“Even if the tiered interest rate introduced today provides some relief, European banks will continue to have to pay billions to the ECB every year as some sort of penalty charge tax,” Hans-Walter Peters, president of the German banking association, said.Draghi also stepped up his rhetoric in calling for governments to spend their way out of a slowdown, singling out Germany, which is obsessed with running a balanced budget.
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