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By Luke Heighton
     FRANKFURT (MNI) - The European Central Bank stands ready to relaunch its
asset purchase programme "should economic developments so require," Bank of
Finland chief Olli Rehn said Tuesday.
     "In case of a further weakening of economic activity and a materialisation
of adverse contingencies ... [the ECB may] strengthen its forward guidance and
its linkage to the achievement of the price stability objective, lower the
monetary policy rates and introduce possible mitigating measures, and/or
re-launch net purchases under the securities purchase programme," Rehn told a
press conference in Helsinki. 
     Rehn, a contender to replace Mario Draghi as ECB President when the Italian
steps down in October, said the Governing Council's decision to extend forward
guidance into the second half of 2020, responded to both a slowing economy and
rising risks.
     "The global economy and global politics are surrounded by protracted
uncertainty, reflecting, in particular, the expanded and heightened trade war in
particular between the United States and China. This trade war is unlikely to
subside any time soon, due to the underlying struggle between the two countries
over technological and economic supremacy.
     "Secondly, economic activity in the euro area has slowed and market
inflation expectations have come down slightly compared with projections in the
early part of the year. Inflation expectations have remained at low levels,
which will hamper achievement of the ECB's price stability objective of below
but close to 2%. For the achievement of the ECB's medium-term price stability
objective, inflation in the euro area may fluctuate around 2% in the short
     Rehn said the monetary decisions taken at last Thursday's Governing Council
meeting in Vilnius "ensure that financial conditions will remain very
favourable, supporting euro area growth, while TLTRO-III will help "increase
domestic price pressures in the euro area and thereby to support the development
of inflation in the medium term."
     In a Tweet posted June 7 Rehn wrote: "Gotta do what's gotta do, as needed.
Resuming #QE & going for lower and/or longer in the toolbox. Potential reasons:
prolonged uncertainty due to increased protectionism and/or inflation
expectations stay anchored too low."
--MNI Frankfurt Bureau; +49-69-720-146; email:
--MNI London Bureau; +44 203 865 3829; email:
[TOPICS: M$E$$$,M$X$$$,MT$$$$,M$$EC$]