The Greek Rollercoaster, Monetary Easing

Two months into 2015 and Greece is roiling the financial waters in Europe once again. The Jan. 25 elections saw a depression-weary population vote the leftwing Syriza party into power. Prime Minister Alexis Tsipras’ new government vowed to scrap a four-year-old European bailout agreement. On Feb. 24, Greece secured a four-month extension of its financial rescue when its euro zone partners approved a reform plan, as Athens backed away from some proposed measures and promised that spending to alleviate social distress would not derail its budget.

Source: Datastream 23/02/2015

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The respite, to be ratified by some national parliaments, averted an imminent banking meltdown and a potential state bankruptcy for now, but tough negotiations lie ahead soon over Greece’s longer-term economic future, Reuters reported.

A Greek finance ministry official said the euro zone’s most heavily indebted nation would start discussions immediately with its EU and IMF partners on meeting this year’s financing shortfall.

Meanwhile, monetary easing is the motto of the day as Indonesia’s central bank on Feb. 17 became the 18th to ease monetary policy this year, surprising markets by cutting interest rates in the face of tame inflationary pressures only three months after raising them, this Reuters story noted.

Among major bank moves, the Swiss National Bank stunned markets by scrapping the franc’s three-year-old exchange rate cap to the euro, leading to an unprecedented surge in the currency. This de facto tightening, however, was in part offset by a cut in the interest rate on certain sight deposit account balances by 0.5 percentage points to -0.75 percent, Reuters reported.

The Danish central bank cut interest rates four times in less than three weeks, and intervened regularly in the currency market to keep the crown within the narrow range of its peg to the euro.

Oil prices sank to their lowest level since 2009. The number of rigs drilling for oil in the U.S. fell to 1,056 in the week ended Feb. 13 – the lowest since August 2011, a clear sign of the pressure that tumbling crude prices have put on oil producers, Reuters noted in this story.

It was the second biggest weekly drop on record, according to data going back to 1987, and the 10th straight week of declines, oil services firm Baker Hughes Inc. said in its widely followed report.

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