As the end of the week is here, we see that ECB President, Jean-Claude Trichet, once again states that the central bank is going to exit the stimulus programs gradually before it triggers inflation on the long run, and this factor is faced by other central banks around the world.
The central bank said that it is not going to continue its 12-month loans, after the third time in December; while the central bank council member stated that the bank is going to provide lower three and six month loans in 2010.
Although the ECB is discussing pulling the stimulus measures out of the euro zone, which was worth 60 billion euros, and set towards buying governmental bonds, however, they said this did not mean that interest rates will be raised from the historic low.
The program has pushed the euro zone to expand in the third quarter to 0.4% from the second quarter contraction of 0.2 percent, after the severe first quarter contraction of 2.5%, which was the worst quarter since 1995.
The comments on the interest rates weighed on the euro heavily versus the dollar; as of 12:20 GMT, the pair is traded at 1.4819 while recording a high of 1.4934 and a low of 1.4805. Also, the euro was pressured as there are worries that if the stimulus program was pulled, the nation's recovery will take longer to occur especially as there are high unemployment rates still and an unstable banking system.
Fears are back in markets regarding the conditions the economy is going to be in once there are no unorthodox measures, which right away had them selling higher yielding assets and buying the lower yielding assets.
Trichet stated that he could not say the recession was over, despite the improvements taking place in the nation, since we still have major obstacles holding back the economic from recovery and will take some time to solve before we begin to witness full economic growth.
