ECB Watch

[BoyRacer]

Draghi has to do, as well as say, whatever it takes - Richard Portes -> ft.com/intl/cms/s/0/9f01f282 … abdc0.html

The clouds over the eurozone economy began to accumulate long ago. It is no use blaming unrest in Ukraine and the Middle East for its flagging economic performance. The road to stagnation did not originate in Gaza and Kiev, and there can be no doubt that it runs through Frankfurt and Brussels. Perceptions are important, but you cannot conjure an economic recovery by summoning the confidence fairy. There is no substitute for pragmatic, non-ideological policies that accept and confront the data – which tell us that current policies are failing.

there is more

[fungus]

Draghi: ECB ready to adjust policy if inflation drops further

in.reuters.com/article/2014/08/2 … ZW20140822

The European Central Bank is prepared to respond with all its “available” tools should inflation in the euro zone drop further, ECB President Mario Draghi said on Friday in remarks that opened the door to possible policy action in September.

Some speculation that the repo and deposit rate could be adjusted by a further 10 bps.

[fungus]

A 10 bps ECB rate cut next week now seems to be a certainty.

JP Morgan and Nomura have come out saying it will happen. Nomura normally make correct calls. Nomura have said that they are 80% certain that the ECB will cut next week.

Draghi has as good as said the ECB will do something in September. The ECB are not yet ready for QE, so a 10 bps rate cut make sense.

0.05% repo rate here we come. Every little helps in the fight against deflation.

[Daniel_Plainview]

0.05% repo rate here we come. Every little helps in the fight against deflation.

You can’t be serious? The base rate has minimal impact on inflation.

[fungus]

Yeah, minimal impact but Draghi needs to do everything that it takes.

[Daniel_Plainview]

Yeah, minimal impact but Draghi needs to do everything that it takes.

Well, counter to popular (read: wrong) opinion a 3% base rate but with a QE commitment on sovereign peripheral debt ‘to keep it within x% of Bunds’ would be more inflationary now than rate cuts.

[Sidewinder]

At what point will it sink into the skulls of the nutters in charge that ZIRP is not just Stupid but actually feeds stagnation and deflation?

Yeah I know, ol’ Sidey has been banging that particular drum since the beginning, the old-time Pinsters are probably rolling their eyes and going “Mad uncle Sidey is ranting about ZIRP again, quick someone distract him or he’ll be droning on all night”.

I still say I’m right and economic orthodoxy is wrong though.

[Daniel_Plainview]

At what point will it sink into the skulls of the nutters in charge that ZIRP is not just Stupid but actually feeds stagnation and deflation?

Only when they stop teaching monetarist bullsh1t as if it is science.
Yeah, changing the price of one variable (cost of money at central bank) by a few basis points will heavily impact every station in the real economy! Give me a fcuking break.

[yoganmahew]

At what point will it sink into the skulls of the nutters in charge that ZIRP is not just Stupid but actually feeds

stagnation and deflation?

Only when they stop teaching monetarist bullsh1t as if it is science.
Yeah, changing the price of one variable (cost of money at central bank) by a few basis points will heavily impact every station in the real economy! Give me a fcuking break.

QE is more monetarist nonsense…

[fungus]

BNP Paribas has joined Nomura and JPM saying that the ECB will cut rates by 10 bps next week.

[fungus]

RBS have joined BNP Paribas, Nomura and JPM saying the ECB will cut next week.

Another reason for a 10 bps repo cut is to increase the TLTRO uptake.

[BoyRacer]

ECB takes advice from BlackRock - google translate] -> handelsblatt.com/politik/kon … 18058.html

The European Central Bank will buy securitization to encourage the banks of the euro-countries to increase lending to companies and households. She takes advice from the world’s biggest asset manager.

Frankfurt The European Central Bank (ECB) is in the development of the proposed purchase of its program for securitized loans on the expertise of the world’s biggest asset manager BlackRock. That said a spokesman for the central bank on Wednesday in Frankfurt. ECB President Mario Draghi had last week said that the ECB working hard on the details of the purchase, as promised in the summer program. BlackRock Solutions, a division of BlackRock will, the ECB advice about the design and technical implementation of a potential program, but the final decisions meet the central bank, said the spokesman.

The ECB hopes that they can stimulate the industry by purchasing securitization, the banks in the 18 euro countries to increase lending to businesses and households and thus boost the economy. Through the securitization of loans banks can pass on credit risk to investors and relieve their balance sheets in this way. This theoretically, they have more money for more loans.

there is more

[fungus]

Bloomberg: Money Markets’ Record Low Seen Pricing 50% Chance of ECB Cut

bloomberg.com/news/2014-09-0 … -says.html

European money markets that are at record lows are pricing in around a 50 percent probability the European Central Bank will cut its refinancing and deposit rates by 10 basis points this week, BNP Paribas SA said.

TD have joined RBS, Nomura, BNP and JPM in saying the ECB will cut on Thursday.

[BoyRacer]

Germany Resists Calls for ECB Aid in Euro Growth Dilemma - -> bloomberg.com/news/2014-08-3 … gs-in.html

German Finance Minister Wolfgang Schaeuble said deficit-fueled growth leads to economic decline, signaling discord with Italy and France as euro-area policy makers seek ways to avoid deflation and spur growth.

there is more

[Sidewinder]

It’s like one of those nightmares where you are powerless to move to save anyone from the oncoming trainwreck.

shrugs

If the Eurozone is determined to go Japanese I’m well out of it.

[slasher]

Cut 10bps

European Central Bank President Mario Draghi has surprised investors and send the euro sliding.

The ECB unexpectedly cut its key interest rate to 0.05 per cent and its deposit rate at minus 0.2 per cent.

Within minutes of the announcement:

The euro had weakened against the dollar to $1.3076
European government bond yields fell, with the yield on the German bond declining to 0.92 per cent

$130.41 last

[fungus]

Good move by Draghi. This will lower TLTRO costs and should lower some borrowing costs.

Fair play to Nomura for been the first with such an accurate prediction.

[Schrodinger]

Is there a good reason to keep 0.05% or 0.00001% instead of just cutting to zero?

[yoganmahew]

Is there a good reason to keep 0.05% or 0.00001% instead of just cutting to zero?

I imagine a rate of zero might present IT problems…

[TheJackal]

Is there a good reason to keep 0.05% or 0.00001% instead of just cutting to zero?

I imagine a rate of zero might present IT problems…

In the UK I believe some banks, who had Bank of England -1% trackers, put it in as 0.01% so their system could handle it