ECB’s Rehn: Recent market turmoil is an overreaction to uncertainty and thin liquidity

• It is not a reaction to fundamental issues with the economy
• If confidence in slowing trend of inflation strengthens, rate cuts can continue
• The path to inflation target is still bumpy

Even so, a repeat of the Friday and Monday rout in markets risks further tightening in financial conditions and could still prompt central banks into action. Or at least traders will wish for that to happen amid more kicking and screaming to come, that is.

This article was written by Justin Low at www.forexlive.com.