Praet Says Low Energy Prices Can Create Deflation ECB Executive Board member Peter Praet said that the central bank may add further stimulus if the outlook for inflation deteriorates. Praet stated that negative energy-price shocks may not only push down inflation over a prolonged period, but may feed into people’s expectations of future inflation” and added that in the case of negative demand shocks, monetary policy should provide additional accommodation.” Praet echoed ECB President Mario Draghi, who announced that the Governing Council [could] use additional unconventional instruments…should it become necessary to further address risks of…low inflation.” The central bank decided to reduce its interest rate to 0.05% as inflation stands at 0.3% and the unemployment rate reached 11.5%. Further rate cuts may weaken the euro relative to the dollar. The EUR/USD reached its lowest level (1.2296) since August 2012 on Thursday. According to PwC, the inflation rate in the Eurozone will stand at 0.5% this year. In the U.S., the Department of Labor reported that the Continuing Jobless Claims rose to 2362K in the preceding week. The figure, which measures the number of individuals who qualify for unemployment benefits, came higher than the expected 2318K. Following this development, the EUR/USD climbed to 1.2433. This benefited traders who placed long positions at the beginning of Thursday’s session. UPCOMING EVENTS 2014-12-05 13:30 GMT United States, Nonfarm Payrolls 2014-12-05 13:30 GMT United States, Unemployment Rate 2014-12-05 13:30 GMT Canada, Employment Change
Posted on: Fri, 05 Dec 2014 14:42:35 +0000
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