DRAGHI FACING DILEMA TO ACT OR NOT

Hi everybody it passed at time since I wrote the last article.This week the most important events are with no doubt ECB Meeting and US jobs reports. One of the big issue of Euro area is deflation.

Are Euro area in deflation or not? Though question that because some ECB officials memebers do not speak the same language.Mario Draghi ECB chairman told that they are ready to act if conditions will require.

Inflatio in the euro area has envolved from 0,8% in january 2014 and now 0,5% in march.At this level we can say that Euro area is in deflation.If we look to euro currency we observe that euro is at high level against the important currencies.In an interview last week ECB official Christian Noyer said :"He is not happy to see euro rise" First of all a strong euro could aggravate european companies in exports and second and the most important characteristic of deflation is falling of prices which can cause global debt crisis explode again .

So today ECB meeting is very important event and we are aeger to see if Draghi learn  something from japanese lesson.It's more evident that ECB will act today.

Negative deposit rate is probably the exact scenario.ECB Coeure declared a few time ago:"ECB is considering a negative deposit rate very seriously"

Also Jens Weidman ECB:" Negative interest rate could counter the impact of strong euro"

Negative deposit rate is not only the measure that ECB officials had in mind.Other measure is quantitive easing.Marcel Fratzscher german economic profesor at Institute for Economic Research demand 600 billion euro bond purchases each month to combat deflation.About this tool Jens Weidman ECB official said:" Quantitive easing is theoretically posible as long as it dosen't infringe the ban on monetary financing of governments.In  my view I think that this measure will be a little though to put in practice that beacuse will require a purchase of 18 different sovereign bonds.

(All rights reserved for this article)