Friday, June 6, 2014

The European Central Bank (ECB) cut its rate to a record level of 0.15%.

English: European Central Bank ECB Eurotower i...
English: European Central Bank ECB Eurotower in Frankfurt a.M. Germany Deutsch: Europäische Zentralbank EZB Eurotower in Frankfurt a.M. (Photo credit: Wikipedia)
German Logo of the ECB.
German Logo of the ECB. (Photo credit: Wikipedia)
International Monetary Fund's Managing Directo...
International Monetary Fund's Managing Director Dominique Strauss-Kahn (L) talks with , European Central Bank President Jean-Claude Trichet (C) and Italy's Governor Mario Draghi (R) prior to the start of their G-7 meeting at the Istanbul Congress Center (Photo credit: Wikipedia)
Wim Duisenberg at the 2001 Spring Meetings APR...
Wim Duisenberg at the 2001 Spring Meetings APRIL 26–30, 2001, Washington D.C. (Photo credit: Wikipedia)
The European Central Bank (ECB) cut its rate to a record level of 0.15%. A deposit rate became negative at all. Eurozone monetary authorities are hoping thereby to give a new impetus to the economy. If the head of the ECB Mario Draghi nevertheless fail to stabilize the growth of GDP in the EU, it will also affect the prospects of the Russian economy.

The European Central Bank (ECB) at the end of its meeting June 5 decided to lower the benchmark interest rate on loans to a record low of 0.15% per annum from the previous 0.25%. Not satisfied with this, the bank has taken a number of measures to mitigate the monetary policy.

"We decided on a combination of measures that provide additional monetary stimulus and support lending," - said at the final press conference, ECB President Mario Draghi. "Back to life the European Central Bank is the moment when you need to act" at any price ", - commented on the meeting of chief economist at ING-DiBa Carsten Brzeski Brussels. - He used everything he had. "

Also for the first time in the history of the ECB deposit rate was negative, -0.1% instead of the previous zero. In other words, now commercial banks, deposits available cash at the ECB, not only will not receive any interest, but will, in fact, penalized.

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This is a further attempt to encourage the banking system does not save money in reserve and lend to the European economy. "The actions of the regulator aimed at stimulating economic activity in the euro area, which is impossible without credit - explains the director of the Department of Resource Management Investtradebank Oleg Tezhelnikov. - A negative deposit rate should lead to an increase banks' credit policy. " "At the same time reduced the price at which the ECB provides short-term funding to commercial banks", - adds the head of department on work in the money markets of the bank "Petrocommerce" Vladislav Chomutov.

"Most of the time provided in the ECB's euro-zone banks trillion euros in fact never reached the economies of the region, being placed on deposit with the ECB and the same on the interbank market - said the president of FC" InvestProfit "Konstantin Kambulov. - Banks were afraid to lend to companies in the region in an uncertain economic environment. " Now the regulator does not want to step on the same rake, the expert adds.

In addition to lowering interest rates, the ECB will hold several rounds of target long-term lending program (TLTRO) a fixed interest rate, the initial amount of 400 billion euros, Draghi added.

"The whole package of measures to support the economy for a long time and obviously does not hurt" - leads the Bloomberg news the chief economist of Berenberg Bank in London Holger Schmieding.

Further easing of monetary policy in today's ECB meeting anticipated by most analysts as the euro area economy remains fragile. "Judging from the data for the fourth quarter of 2013 and the first quarter of 2014, the eurozone out of recession - analyst Investkafe Roman Hrinchenko. - Economics for these periods added 0.5% y / y and 0.9% y / y, respectively. " But this "fragile recovery," and,

whether locally ECB Federal Reserve System (FRS) the USA, it would long ago have launched a massive stimulus package, he said.

Sam ECB lowered its GDP growth forecast in 2014 to 1% from the previous 1.2%.

In addition to economic growth, the European Central Bank in its actions and focuses on inflation, which, in his view, should ideally be at the level of 1-2%. The annual inflation rate in the eurozone slowed in May to 0.5% from 0.7% in April. This is the lowest in four years. Growth in consumer prices is below 1% (the current base reference ECB) for the eighth consecutive month.

"Factors such low inflation are reduced growth in prices for food and energy prices and the exchange rate, and also to some extent stable weak demand," - said Draghi. The risks, the stronger the longer inflation remains substantially delayed, and that it responds to the ECB - to "the risk is too long a period of low inflation," he added.

So

low inflation not only allows ease monetary policy without fear of price hikes, but even encourages this, as now in Europe are more afraid of deflation - reducing the overall price levels, the negative impact on economic growth.

Therefore, many analysts expect the ECB to continue to continue to stimulate the economy by monetary. Moreover, since Draghi said the ECB "bottomed interest rates for all practical purposes," it will be non-standard, "quantitative" measures.

"Investors expect that the ECB will not completely abandon the idea of ​​unconventional steps, as quantitative easing," - said a senior economist at Nomura International Nick Matthews.

It gives hope and speech Draghi, who said that the ECB is preparing to quantitative easing in the form of repurchase of asset-backed securities (ABS).

Since loose monetary policy means an additional sentence appropriate currency and decline in yield instruments denominated in it (interest rates), it causes a weakening of its course. In response to the news of the ECB's decision on the global markets, the euro weakened to $ 1.361 to $ 1.35, and on the Moscow stock exchange currency trading European currency traded moments below 47 rubles., Although the official rate for tomorrow, June 6, mounted on the end of the morning trading session, - 47.49 rubles.

This depreciation of the euro - also the goal of the central bank, and must also participate in further stimulating the economy.

"Mitigation of monetary policy leads to a weakening of the euro, which is the aim of the ECB step" - said Tezhelnikov.

Weak euro benefits (gives an additional competitive advantage) exporters (a "locomotive" of the euro area - Germany - one of the leading exporters in the world), as well as businesses that compete with imports. "Given that the weakening euro will certainly lead to higher inflation, namely as a result of these developments, the euro zone's export sector will start to show signals to recovery" - predicts Kambulov.

The weakening of the euro against other major currencies in the whole stable exchange rate of the ruble against the U.S. dollar will lead to a sharp strengthening of the national currency against the currency basket of the Central Bank expects Kambulov.

"Massive liquidity injections can lead quotation in the direction of $ 1.33 per euro,

half-measures or their absence will contribute to stabilization, "- analyst expects Investkafe Dmitry Demidenko.

Easy to calculate, starting from the CBR official exchange rates that

at $ 1.33 per euro and stable dollar-ruble ratio euro may fall to nearly 46 rubles.

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But since the ECB was generally expected by (economists polled by Bloomberg, predicted an even more significant reduction in the base rate to 0.1%), their impact on the financial markets proved short-lived. Euros for a couple hours partially restored its position. 19.23 In contracts for a couple ruble-euro "tomorrow" on the Moscow Stock Exchange is worth 47.27 rubles.

Not everyone in Europe, as well as experts' Gazety.Ru "hope for the effectiveness of the new measures and the ECB in terms of their main goals. You can spend

parallel with the situation in Russia: some monetary measures and the economy here and there not revive, serious structural reforms. "There is an opinion that this measure will not have a strong stimulating effect, as factors constraining its growth, are non-monetary"

- Notes Chomutov. Besides already have experience of introducing negative deposit rates - Denmark - but it is still important positive results did not give Demidenko says.

"The ECB takes the market a false alarm, - said a member of the finance committee of the Bundestag Ralph Brinkhuis. - The key to overcoming the economic crisis is the consistent policy of structural reforms, rather than the policy of reducing interest rates. "

Eurozone economy and Russia not only in relation to similar performance while weak monetary measures, but also strongly linked. Europe - the main foreign trade partner of Russia, and

Draghi if efforts will be in vain, and our economy is in the near future will not wait for support from "Curzon Line", and it is still almost the only significant factor that could keep her from slipping into recession.
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