Thursday delivered a rude shock to institutional investors hoping that an event-free couple of weeks would usher them into Europe’s protracted Christmas and New Year vacation period, leaving them fresh for another potentially turbulent year on their return.
On the political front, Italy’s technocratic government, which has rescued the country from fiscal oblivion, came a step closer to collapse.
On the interest rate front, Mario Draghi, president of the European Central Bank, signaled that the ECB is ready to take further monetary measures to inject much-needed vigor into the ailing euro zone economy.
The ECB left its benchmark main refinancing rate unchanged at 0.75 percent after Thursday’s monthly monetary policy meeting.
However, at the postmeeting press conference, Draghi was considerably more explicit than in recent months about the possibility of additional interest rate action to aid the euro zone.
“There was a wide discussion” about interest rates, Draghi said about the meeting.
Analysts think the ECB could cut its main refinancing rate — the principal rate at which it lends money to banks — by a further 25 basis points in the next few months, to 0.5 percent. Commenting after the Thursday conference, Deutsche Bank confirmed its forecast of a 25 bp reduction at the end of the first quarter.....
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