Melvyn Krauss, Columnist

The Politics of Ending Europe's Stimulus

Don't expect the European Central Bank to taper QE while big political risks to the euro remain.

June 16, 2017 at 9:12 AM UTC

Melvyn Krauss is a senior fellow at the Hoover Institution at Stanford University and an emeritus professor of economics at New York University.

No ECB taper while he’s in the picture.
Photographer: Andreas Solaro/AFP/Getty Image

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Did you notice that when the European Central Bank responded at its June meeting to the euro zone’s increasingly strong economic recovery by announcing it would not cut record low interest rates any further, the euro went down instead of up?

Markets, apparently convinced by the ECB’s pledge to stick to its present forward guidance that interest rates won’t be going up for a long time, did not bid up the euro when the first baby steps toward a rate increase actually were taken. That speaks volumes to the credibility of the ECB’s forward guidance message in markets.