ECB Announces New Policies

As markets prepare for the OPEC meeting, Saudi Arabia’s Oil Minister announced that his country is willing to cut in production as long as a number of conditions are met. Saudi Arabia suggested that it is willing to slash output by 1 million barrels of oil per day if other OPEC and non-OPEC members agree to participate. Most oil producers are pressuring the OPEC leader to minimize output as they wish to raise the price of oil, but oversupply conditions continue to weigh on prices. Despite the agreements made the past year in OPEC meetings, oil output rose to 33.328 million barrels per day versus the 30 million barrels per day production quota for the cartel. After the Minister’s statement, oil prices rose with Brent reaching back above $44.00 and WTI climbing over $41.00.

The ECB announced on Thursday that interest rates will be kept at 0.05%, the lowest since September 2014. The Governing Council cut the deposit rate by 10 basis points from -0.20% to -0.30% in an effort to stoke spending and inflation. Furthermore, the monthly asset purchase of €60 billion will be extended until March of 2017 or beyond, if that will be considered necessary. Other measures to be taken by the ECB are the reinvestment of principal payments on securities purchased, the addition of Euro-denominated marketable debt issued by regional and local government in the European Union to be included in the public sector purchase program, and continuation of the main refinancing operations.  The new monetary measures imposed are a security precaution to bring back inflation to its targeted estimate of nearly 2.00%, expressed the ECB President. However, the outlook is full of risk factors as evidenced by the speech.