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March 22, 2016

Exchange Rates Are To Be Pushed Down Deeper By ECB & BOJ

Exchange Rates Are To Be Pushed Down Deeper By ECB & BOJ

The negative interest rates are used by the European Central Bank and Bank Of Japan in order to push down their currencies value deeper. However, there are certainly limits to the effectiveness of such rates. At the moment where rest of the world is not growing normally, pushing down the exchange rate has become essential.

Nonetheless, The ECB and BOJ representatives argued that the aiming for weaker currencies with policies aimed at bolstering growth and inflation is not a deliberate matter. Earlier this month, ECB President Mario Draghi said that it is true that some of the measures have obviously a spillover on the foreign-exchange market. However, he also stated that the ECB is not in the war at all and denied that it is intent on manipulating the Japanese currency.

In the G-20 meeting last month that took place in Shanghai, global finance ministers and central bankers reiterated their past commitment to hold back from such thing as competitive currencies devaluations.

In the future, the role of the central banks will somewhat ignite a debate due to the scope in which central banks mandates have eventually expanded, often by default to deal with crisis. In such particularly uncertain world as it is now, an intelligent and collective respond to it has become the utmost importance and necessity.

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