The Ecofin Council has finally reached an agreement on a general approach to a Single Resolution Mechanism (SRM) with the creation of a single decision body named the Single Resolution Board (SRB) and a Single Fund for the resolution of banks (SRF). The adoption of an SRM is a necessary element for the euro area […]
Monetary developments weakened further in October. The annual growth rate of eurozone M3 monetary aggregate decelerated by 1.4% y-o-y after posting 2.0% y-o-y in September, below the consensus expectations (1.7% y-o-y) and marking the lowest annual growth rate since October 2011. Meanwhile, loans to the private sector, which were already negative (-1.6% y-o-y) in September, […]
Measures taken by central banks and the way in which they communicate their monetary policy to the world at large in the coming weeks will have a significant bearing on the fate of the global economy. The knock-on effects on national and international economic indicators from the Fed’s statements and the PBoC’s pronouncements and actions in both May and June […]
Amid rising interest rates imported from the United States and renewed tensions on sovereign debt due to the political crisis in Portugal, Mario Draghi yesterday had the difficult task of convincing the market that the ECB’s monetary policy will remain accommodative for a long period of time and that the Governing Council (GC) was still far from […]
In May’s press conference, Mario Draghi created several expectations: 1. Further refi rate cut: “we will stand ready to act if needed” 2. The deposit rate, currently at 0%, could be brought negative: “we are technically ready” 3. Joint measures could be taken with the European Investment Bank (EIB) to revive the ABS market in […]
Thursday’s European monetary announcement only true surprise in terms of monetary policy was that the Governing Council appears to be seriously considering a negative deposit rate. However, as it is a two-edged tool, its impact on bank loans would be uncertain. No clear guidance to unlock the credit crunch A decision to buy asset-backed securities […]
The Cypriot parliament’s overwhelming rejection of the proposed levy on bank deposits has piled confusion upon uncertainty. In this note, we have looked back at the origins of the crisis, explored the kind of options left open to the authorities and pinpointed some of the consequences for investors. Origins of the crisis The attractiveness of […]
We continue to be very pessimistic on the likelihood of the euro area periphery getting out of recession by themselves or being towed out by their export sector. We therefore maintain our forecast of a rate cut in H2 and continue to think further non-orthodox measures will have to be adopted by the ECB in […]
The tone during yesterday’s ECB press conference was slightly less upbeat than January’s. Accelerating disinflationary process, the impact of the euro’s strength, the fragility of confidence and the downside risks to the economic recovery, give the impression that the Governing Council has not closed the door for further easing measures. As we continue to be […]
We continue to expect that the ECB will have to act decisively to help the depressed economies to recover. A rate cut could help, but more importantly unorthodox measures to reduce interest rates for consumers and businesses will be required. A decision to accept banks’ loans as a form of collateral could be an example […]
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