NEW YORK (TheStreet) -- Treasury Secretary Jack Lew breathed a sigh of relief last week when the European Central Bank issued unprecedented policy to combat growing deflation concerns in the European region.
Lew, answering questions at the Economic Club of New York from Macy's (M - Get Report) CEO Terry Lundgren and Stern School of Business Dean Peter Blair Henry, said the features of the ECB's changes highlighted some of the Obama administration's concerns about the European recovery.
The Treasury Secretary said he was pleased with the ECB's recent decision to encourage banks to lend to small- and medium-sized private enterprises, a sector he says has lagged the United States since the end of the Great Recession.
"What Europe is doing, economically, has a big effect on U.S. stocks," Wells Fargo Advisors chief equity strategist Scott Wren, said in an interview. "So the better the European economy is doing, the more money our companies are going to make." These policy changes come as disinflation has continued across many European nations -- a signal that the eurozone economy could be headed for deflation without extraordinary action. Economists argue that the main function of central banks is to control inflation -- keeping it from going too high or turning into deflation. The Fed's and ECB's key tool to control inflation is setting interest rates, but as the global economic registered its worst pullback since the Great Recession, near-zero interest rates weren't enough to soften the impact. The Fed acted with a quantitative easing program, which included purchases agency-held asset-backed securities to help stimulate the financial sector.
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The S&P 500 Is Reaching a Top, Here's the Case for Why -- Written by Joe Deaux in New York. >Contact by Email. Follow @JoeDeaux