ECB Watch


#2001

Seems more likely than not at this stage.

Its more about credibilty, you know “being seen to act”.

A 10-15bp cut does very little in the grand scheme of things with regards to growth and inflation however tracker holders will certainly feel the difference.

Something more non-traditional needs to be done to ward of the ever increasing risk…
Periphery nations ( i.e Spain, Port, Greece, Cyprus) require deflation as part of re-adjusting and recovering. We havnt seen it in the core as of yet.


#2002

Really? You think €12.50/100,000 borrowed/month for a 15bp cut is going to feel different?

I can’t see it myself.

We are so far into diminished returns, that it is entirely pointless.

Welcome to Japan folks.


#2003

Not that I am disagreeing but €12.5 per month is equivalent to a €312.5 pay rise for a higher rate taxpayer.


#2004

True!


#2005

Cumulative effect. I’m on a tracker since 2007 - first mortage repayment was 2,400 a month and we are now just above 1800. Huge difference, particularly as, like most people, our financial circumstances have become more … complicated … in the meantime. Every little helps.


#2006

I agree, but the point I’m making is that it isn’t about to set the European economy alight.


#2007

It says it all when the ECB’s IR is set by the state of the banking system than the state of the economy.


#2008

When did I ever say it would set things alight.


#2009

So tracker holders are going to feel the difference by, eh, what exactly? (If not spending more).


#2010

12.50/month is a difference. If someone stopped by your house on the first day of every month with an envelope containing 12.50 you’d rather have it than not. Stop being a pest.


#2011

Again, I think you are underestimating both cumulative effects and the psychological factors. In my case for instance, 3 years ago my mortgage was above 2k a month, the euro seemed to be on the brink of falling apart and my house was in negative equity. Today, I have a mortgage that will probably be under 1800 a month tomorrow, a house probably back in positive equity and an economy that is showing some signs of recovery, even if many of the signs are disputed on the Pin (partially correctly, partially incorrectly in my opinion). Does that mean I am about to race off and apply for credit to buy lots of tat und bling? No. Does it mean that, for the first time in five years, I might consider necessary expenditure on domestic goods that I can afford and relaxing slightly day to day household austerity measures? Over time, probably yes. Its what I see around me also.


#2012

Draghi Builds United Front for New ECB Push Against Deflation: Bloomberg.

There is clearly a lack of consensus on what to do today. If leaks are to be believed, Draghi is trying to build consensus for rate action.


#2013

If they want to fight deflation with QE, may I suggest they give each EU citizen €10k rather than the banks, with the stipulation that it be used to pay down debt first.
That way, debt gets paid down, benefiting both banks and debtors.
To those that didn’t have debt, they can spend the money as they see fit, thus stimulating the economy.


#2014

and what if they choose note to, postponing spending with the inclination that prices will be cheaper in the future. Banks also repay QE money as it’s their debt the ECB purchase.


#2015

The “money” has an expiry date, spend it or return it!


#2016

“Whatever it takes” me ass. Rates on hold despite 0.50% inflation.


#2017

I imagine they consider it pointless to fiddle with rates as deflation burns. The argument will surely be about what to do instead.

The alternatives are monetary financing or, um… any ideas?


#2018

Isn’t that functionally equivalent to monetary financing?


#2019

FAZ reporting ECB modelled bond buying up to 1 trillion euros

but Leaning more towards credit easing

forexlive.com/blog/2014/04/0 … man-press/


#2020

FT: ECB Will Cut Rates Before Embarking on Quantitative Easing.

ft.com/intl/cms/s/0/d1c77460 … z2ymFJpNBE