ECB Watch


#2021

“The monetary union has failed.” Former EU Commissioner Bolkestein - google translate] -> lantidiplomatico.it/dettnews … 82&pg=7539


#2022

So what is this? Why can I find no reference to this conference “Europe without the Euro”, held in Rome last Saturday,on Google? Who organised it? What was their agenda? Why did they commission Bolkestein in particular to speak, noted for his outspokenness and strong statements on immigration, his “Dutch values”, his proposals with regard to further liberalisation of markets, and other convictions fr.wikipedia.org/wiki/Frits_Bolkestein In other words, so fucking what if some fuck-wit declares “the monetary union has failed” to his cronies. And why then would an intelligent person attempt to paint that statement as significant to the drooling masses? Unless they had some ulterior agenda? :angry:


#2023

Some people aim to get ahead by trying to protect themselves from doomsday, then wishing doomsday on everyone else.


#2024

#2025

Course some of us right here were arguing years and years ago that ZIRP would actually feed deflation and prolong the duration of the slump. Just like it did in Japan. Some people never learn it seems.

IMO more evidence for the failure of ZIRP:

NZ continues to raise rates to 3% with clear signposting by the Reserve Bank that they intend to bring rates to a neutral level - around 4.5% - over the next year or so.

The budget next month is also expected to return NZ to budget surplus this fiscal year with debt peaking at 26.5% of gross domestic product (GDP) .

NZ is one of the only developed economies that didn’t go ZIRP post-2008, the base rate never went below 2.5% and real rates never went negative.


#2026

It seems that analysts are tripping over themselves predicting a June rate cut by the ECB. 2 of 62 Reuters polled economists think it will happen at lunchtime today, rather than June. I think those 2 economists will be right.


#2027

:frowning:


#2028

Pah, I would be surprised if it was even June. Pushing on a string…


#2029

ECB rate cut more or less a done deal.

irishtimes.com/business/econ … -1.1794491

All rates will be cut between 10 and 20 bps. The refi rate might be about to drop to 0.05%.


#2030

If you have a tracker, it will probably pay the water charges next year :nin


#2031

Reuters reported yesterday:

reuters.com/article/2014/05/ … 5020140514


#2032

Are the banks likely to up SVR rates any time soon?


#2033

On previous form-that’s a big 10-4 good buddy,someones got to pay for all dem tracker lads and it aint gonna be de banks.

The disconnect between ECB rate cuts and SVR is so total that you can now almost bet on an increase in rates for SVR holders.

What happens when ECB rates start to rise?


#2034

very likely herald.ie/opinion/columnists/dan-white/will-others-follow-ptsb-rate-hike-have-a-guess-30238797.html


#2035

Yes, but timing is key. The banks wont want to be seen to be pushing up their SVR around the same time as the ECB cut rate their rate at the start of June.

Not happening anytime soon if the projected inflation rates are correct. According to ECB predictions, inflation will stay below 2% until at least 2017.


#2036

Maybe the cut in the refinance rate will not be as big as 20 bps, Praet wants a 10 bps cut …

ECB’s Praet to recommend cutting main rate to 0.15 pct, says ‘Spiegel’ magazine

irishtimes.com/business/econ … -1.1800546


#2037

A lot of people have queried the effect of the refi cuts by the ECB.

Crédit Agricole have a great article on why the June refi cut by the ECB really matters.

catalystresearch.ca-cib.com/web … ca-cib.com

In summary …

  1. Close to the zero bound, a rate cut can be expected to have a non-linear impact, especially if it comes with a negative deposit rate.
  2. A rate cut would optimise the impact of a potential LTRO.
  3. A lower Refi rate implies a lower cap for short-term money market rates.
  4. A rate cut would show the ECB’s dovish stance is not all talk.
  5. A rate cut would help the ECB decouple further from Fed policy.
  6. This, in turn, has raised hopes that the exchange rate of the EUR will start to weaken more substantially.
  7. Further conventional easing remains consistent with incoming data, a simple forward-looking reaction function suggests the
    ECB needs to cut rates by between 8bp and 28bp (see table).
  8. Therefore, it would have to convince the market that the next easing step, if any, would be more radical, including
    (public or private) QE if need be.

#2038

negative deposit rate in Switzerland for years now – currency very strong - due to massive trade surplus
eurozone will be same – Euro will not (excessively) weaken - assets will be bid further (incl govvies) - trade surplus will strengthen bringing currency with it
shift in FX would be if Specs can build up steam shorting it, unlikely at the moment


#2039

McWilliams thinks that the ECB will go all the way and cut the Refi rate by 25 bps in June, contrary to the general expectation of 10-20 bps.

McWilliams also thinks that the deposit rate might get cut to -0.15%. He then mistakenly states that “This means saving money will cost you.” Which is crap. The correlation between deposit rates on the trillions in retail deposits in Eurozone banks and the cost of parking excess reserves at the ECB, which currently stand at just 34 billion, is extremely weak.

davidmcwilliams.ie/2014/05/2 … -266200345


#2040

davidmcwilliams.ie/2014/05/2 … -266200345

gotta love this gem!

wat!?