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Message
ECB cuts rates
Posted on 6/5/14 at 8:05 am
Posted on 6/5/14 at 8:05 am
LINK
Not quite QE...But I look for it to be coming before year end about the time the US QE is wrapping up.
Not quite QE...But I look for it to be coming before year end about the time the US QE is wrapping up.
This post was edited on 6/5/14 at 8:06 am
Posted on 6/5/14 at 9:58 am to LSU0358
Probably signals that EU not going to get much help from China, Japan and US Central Banks.
There has been talk of neg. rates. This is from the St. Louis Fed: Paper from Jan 2013 (Just 18 mos ago):
St.Louis Fed.
There has been talk of neg. rates. This is from the St. Louis Fed: Paper from Jan 2013 (Just 18 mos ago):
quote:
Some analysts have argued that such examples suggest that central banks should consider setting negative policy rates, including negative rates on deposits held at the central bank. Such proposals are foolish for a number of reasons. First, a policy rate likely would be set to a negative value only when economic conditions are so weak that the central bank has previously reduced its policy rate to zero. Identifying creditworthy borrowers during such periods is unusually challenging. How strongly should banks during such a period be encouraged to expand lending? Second, negative central bank interest rates may be interpreted as a tax on banks—a tax that is highest during periods of quantitative easing (QE).3 Central banks typically implement QE policies via large-scale asset purchases. Sellers of these assets are paid in newly created central bank deposits, which, in due course, arrive in the accounts of commercial banks at the central bank. It is an axiom of central banking that the banking system itself cannot reduce the aggregate amount of its central bank deposits no matter how many loans are made because the funds loaned by one bank eventually are redeposited at another. Is it reasonable for the central bank to impose a tax on deposits held at the central bank when the central bank itself determines the amount of such deposits held by banks and the banking system? Perhaps these and other considerations caused European Central Bank President Mario Draghi in a recent press conference to label negative deposit rates "uncharted waters" and dismiss any possibility that the ECB would consider it."
St.Louis Fed.
Posted on 6/5/14 at 12:27 pm to Blakely Bimbo
quote:
EU not going to get much help from China, Japan and US Central Banks.
Agreed. The US will be winding our QE up at the same time ECB is starting theirs.
The Fed and the ECB has handled this (crisis since 2008) very well. Looks like we will miss out on any deflation and staggering the QE's will cut down on inflation possibilities.
After looking at Draghi's statement this morning the ECB is still prepping for QE but not quite ready yet.
quote:
preparatory work related to outright purchases of asset-backed securities
But the ECB LTRO program looks like a good one with the ECB cutting down on the possibility of another property bubble by excluding loans to households for home buying.
quote:
Second, in order to support bank lending to households and non-financial corporations, excluding loans to households for house purchase, we will be conducting a series of targeted longer-term refinancing operations (TLTROs). All TLTROs will mature in September 2018, i.e. in around 4 years. Counterparties will be entitled to borrow, initially, 7% of the total amount of their loans to the euro area non-financial private sector, excluding loans to households for house purchase, outstanding on 30 April 2014. Lending to the public sector will not be considered in this calculation.
LINK
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