Spanish and Italian banks will have access to fewer ECB funds with new TLTROs
Banca March | The ECB announced other limitations on liquidity that will make it difficult for peripheral banks to access the new TLTRO III.
ECB
Whatever it takes, once again
“There is no probability of deflation, there is very low probability of recession, there are no threats of de-anchoring of inflation expectations,” Mario Draghi said on Thursday. The governor of the European Central Bank announced once again – as he did in March – that it will delay the rate hike at least until 2020 and kept all options open, especially in case economic prospects deteriorate. ECB’s decision is in line with those of other central banks in the world. The Fed has just opened the door to a rate cut, something that Australia and India have already done.
Eurozone banks store almost 2 Bn€ which they return to the ECB because of the troubles in “putting it to work”
Market concerns persist, and there seems nothing in the short term that will change this. In fact, the latest ECB Financial Stability Report gave evidence of the nest of problems and risks in which we have found ourselves for some time, while recalling the downside balance of current risks, analysts at Intermoney point out.
The Japanisation of the European economy
José Ramón Díez Guijarro (Bankia Estudios) | Fortunately, in the EMU, with the exception of the second half of 2014, when the expected inflation expectations traded by the five year German bond reached negative territory, this deflation risk seems much more contained. This could be the principal difference between the European and Japanese economies.
ECB reaching out for banks
Axel Botte (Ostrum AM) | Equity markets resumed rising last week. European indices gained as much as 2.5%. The rebound in bank stocks appears traceable to Mario Draghi’s comments hinting at possible changes to the deposit facility rate scheme. Equity markets were also upbeat in Asia and in North America.
European banks could reduce the bill of 7 billion euros for the excess cash in the ECB deposit account
Intermoney | The president of the ECB opened the door to further stimulus if the economic and inflation perspectives in the Eurozone remain low, in the shadow of a scenario dominated by downside risks for activity. In fact, he recalled that “there is no lack of instruments” to fulfill his mandate, at the same time as he is contemplating new delays in raising interest rates. Textually he said: “we are assured that monetary policy continues to accompany the economy, adjusting our orientation on interest rates to reflect the new inflation perspectives”.
The ECB’s Decision On Interest Rates Hits The European Banking Sector
The ECB changed their forward guidance in yesterday’s meeting, signaling the hold in rates “at least to the end of 2019” along with a new round of TLTROs, in order to keep the credit flowing. Dave Lafferty, chief strategist at Natixis IM, reports: “If you were waiting for evidence that European monetary policy has turned the corner, you’ll definitely be disappointed… if not surprised.”
The End Of ECB’s Quantitative Easing Is Coming
At its Governing Council meeting today, the European Central Bank is expected to confirm the termination of the asset purchase programme by the end of December 2018. The expiry date had so far been subject to incoming data and the medium-term inflation outlook. While incoming data in the past weeks has been rather disappointing, economists at Julius Baer see the solid credit activity as a valid reason to stop asset purchases.
The ECB Will Be Unable To Normalize Its Monetary Policy Soon
The ECB will not start the normalization of its monetary policy in 2019. This is the bet of Philippe Waechter, chief economist at Ostrum AM (affiliated to Natixis AM). He also thinks that the interest rate level will remain stable, that the refi rate and the deposit rate will remain at the current level in 2019.
ECB Head Warns Against Protectionism
Israel Rafalovich (Brussels) | Mr. Draghi urged action through organisations such as the WTO to address variations in tax regimes, take a stand on labour regulations and put in place tougher rules for cross border finance. Mr. Draghi pointed out that in order to accomplish that the EU would have to strengthen it own institutions including setting up a country risk sharing institution for the of the 19-country euro zone.