The European Monetary War Is Quietly Starting.

The Central Bank of the euro area is looking at every move of Delagi, President of the European Central Bank (ECB). The ECB monetary policy is a bit of a stir. They are always ready to move.

Yesterday, the Wall Street saw that the European Central Bank is now reaching a consensus on lowering the deposit interest rate at the December meeting, and some members believe that the rate cut should be greater than the 10 base points expected by the market.

The move is expected to further devalue the euro and boost inflation in the euro area.

Under the easing policy of Draghi, the euro area's investment income has declined, prompting capital inflows into neighboring countries to find high yields, pushing up the currencies of neighboring countries, and impeding the efforts of these countries to achieve their own inflation targets.

Once Delagi cuts interest rates next month, the central banks of the neighboring countries are bound to take retaliatory measures to increase their easing policies in order to hedge against imported deflation, such as buying bonds, cutting interest rates or intervening in currencies.

Even countries with strong economic growth and overheated asset markets will need to do so.

Bloomberg quoted Jefferies International senior European economist Marchel Alexandrovich as saying that for those countries, they did not want to be the losers of the currency war that ECB participated in.

"This is a zero sum game. If you want to devalue the currency, it will always affect the counterparty."

ECB data show that in January of this year, 22 Zdragi announced the launch of the euro 1 trillion and 100 billion debt purchase plan. European residents' holdings of 9 non euro zone European countries' debt and stocks surged to a record high. In the first quarter of this year, the total investment in these countries rose 9% to 2 trillion and 50 billion euro yuan.

Although ECB officials have repeatedly stated that their policy objective is not to adjust the exchange rate, they also acknowledge that if the depreciation of the euro will help promote the export of the euro area and boost import prices, thereby boosting the euro area's economy and inflation.

In terms of trade weighted, the euro depreciated by nearly 7% this year.

For those countries whose currencies are relative to the appreciation of the euro, the decline in energy prices has put them in a huge downward pressure on inflation, which is intolerable because of currency appreciation.

Today, inflation is only 0.1% in Sweden, far below the target of 2%; Denmark's inflation is 0.3%, while Czech's inflation is only 0.2%; Switzerland, Poland and Hungary are already in deflation.

From the euro zone itself, the region

Growth has stopped, and ECB is considering whether it is necessary to increase the stimulus policy.

Against this background, even if the domestic objective conditions are not allowed, countries that have loosened monetary policy during the year continue to face more and more relaxed pressure.

The outflow of capital from the euro zone led to the depreciation of the euro against Swedish kronor, Poland ZrTi, Czech kronor and Hungarian Folin.

In this war, the Swiss central bank acted preemptive and took the lead in abandoning the franc ceiling in January 15th before Delagi announced the launch of the debt purchase plan.

In Switzerland, according to UBS statistics, Swiss real estate prices have risen to a very dangerous level, but SNB President Thomas Jordan said the country's current -0.75% interest rate will be further lowered.

Sweden's real estate price has risen 50% since 2009, and domestic GDP growth is two times that of the euro zone. Despite the risk of overheating, the central bank's easing of monetary policy may be the last resort.

Per Jansson, a deputy governor of the Swedish central bank, said last week that the central bank has no room to cut interest rates or buy debt and will intervene in the money market.

Swedbank AB economist Par Magnusson said the more the ECB did on QE, the greater the pressure on the Swedish central bank to prevent the Swedish Krona appreciation.

In Denmark, the unemployment rate has dropped to less than 4%. In the past year, real estate prices have increased by 10%. But if the Danish central bank wants to maintain its pegging to the US dollar, further easing policy is inevitable.

But unfortunately, according to Arne Lohmann Rasmussen, head of fixed income research at Danske Bank A/S, Denmark may have used up all the traditional policy tools.

He said:

Already in the lower limit of -0.75%, in the face of ECB's possible action to raise the value of the DKK, if the Danish central bank wants to respond, it may need to intervene again.

For ECB, how to mitigate the distortion of the policies of the neighboring countries caused by them?

There is no help.

ECB executive director Benoit Coeure said last week:

We are watching the impact of our decisions on the rest of the world, especially for the surrounding countries.

But what we can do is limited to the euro zone.

ECB's own policy is also affected by the possibility of raising interest rates by the Federal Reserve in December, and for the peripheral countries of the euro area, the best result is capital inflow into the US, and ECB will not take action.