More evidence that there is official concern that deflation is winning the battle. The ECB cuts interest rates and announces an asset buying program. Bloomberg and the NY Times both offer articles clearly stating that the concern is deflation and the move is an effort to "stave off the threat of deflation"
The ink barely dried on our recent post saying we need to keep an eye out for signs of official concern about a deflation event when the ECB makes their surprise announcement. Below are links to two articles and some quotes, then a few comments.
"Speculation that the European Central Bank would start buying debt in the year ahead had pushed the yield spread between U.S. 10-year Treasuries and German bunds toward a 15-year high and German 10-year yields to a record low of 0.866 percent last week. The ECB unexpectedly cut interest rates and pledged to buy asset-backed debt at today’s policy meeting to spur economic growth and stave off the threat of deflation."
"The ECB will start buying securitized debt and covered bonds, potentially easing the flow of bank funding for the region’s faltering economy."