The ECB again reduces the rate of deposit while Europe is heading for an uncertain future – Politico

Analysts had hoped to obtain additional clues on the probable political path to come from new ECB’s forecasts for growth and inflation. But the rupture of the United States with Europe about the defense of Ukraine last week and the subsequent reaction of Europe changed the wider backdrop as radically than the forecasts – which were little changed from December – were widely exceeded by events.

Germany’s maritime change in fiscal policy in response to growing concerns that US President Donald Trump has actually abandoned Europe, combined with other efforts to stimulate spending at European level, has led to a sharp increase in the loan cost of the euro zone.

The loan costs in Germany have displayed their highest increase in a day on Wednesday since reunification in 1990. Investors assume that the upcoming reinforcement of public spending will also support growth and will lead the reduction rates of the ECB less than they thought before. The financial markets are now entirely price for two additional rate drops in December – against three at the start of last week.

At a press conference Thursday, the president of the ECB, Christine Lagarde, acknowledged that major changes were underway in Europe, the European Commission and Germany in particular floating plans for a massive increase in defense spending and, to a lesser extent, infrastructure.

Lagarde said the board of directors agreed that the two plans “would be favorable to European growth as a whole”, although it has added that their impact would depend on details that are not yet clear.

This story has been updated.