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ECB Cuts Refinancing And Marginal Lending Rates By 25 bps And 50 bps, Respectively
While the ECB's refinancing rate cut of 25 bps was very much expected, and just took place pushing the main refi rate to a record low 0.50% (because more liquidity is just what Europe's collapsing economy needs), what was unanticipated was that the Marginal Lending Facility (which last time we checked was used by pretty much nobody) was also cut, from 1.5% to 1.0%. The deposit rate, at 0.00%, was obviously left unchanged.
From the ECB:
At today’s meeting, which was held in Bratislava, the Governing Council of the ECB took the following monetary policy decisions:
- The interest rate on the main refinancing operations of the Eurosystem will be decreased by 25 basis points to 0.50%, starting from the operation to be settled on 8 May 2013.
- The interest rate on the marginal lending facility will be decreased by 50 basis points to 1.00%, with effect from 8 May 2013.
- The interest rate on the deposit facility will remain unchanged at 0.00%.
The President of the ECB will comment on the considerations underlying these decisions at a press conference starting at 2.30 p.m. CET today.
Now the question is whether Draghi will engage in non-standard measures to facilitate lending for SMEs. For this, tune in to the press conference in 45 minutes.
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Everyone put on your shocked face.
Move quickly. It's not "priced in" yet!
You clued me in. I had been trying to conjure up a play to alleviate the daily drudgery of my shitty life. Anyways, you helped clue me in. The insiders have made their moves already. Silver has been moving up all pre-market morning. So, the play is to short SLV and wait for the sell-off/profit taking to begin shortly after the opening bell. Hell, maybe even a coordinated "kick them while their down" raid is part of the plan.
I feel good about this paper trade hahaha!
All I do is lose at the paper game, but I just can't let it go...fuck it. And fuck you Ben, Mario, and everyone else who doesn't merit printing their names in this buried post penned by a nobody.
This should really help the unemployed youth in Spain etc.. [/sarc.]
Let them eat bank loans.
And all of this is EUR/USD positive.....huh..
Got to find some way to regain all of yesterdays stawk losses before open this morning!
This rate slashing is nothing short of a POMO derivative.
It's going to be a double whoopee day.
Positive for a few more hours. However long it takes to punish the people that were short before the announcement and shake them out.
Cutting rates and currency gets stronger lol. Why are they cutting rates again? Oh yeah because the economies are tanking.
"Greatest Depression Ever." What's going on in the euro zone is a true tragedy....staggering in its scope, scale and devolvement. Think "the US South after the Civil War."
You mean the part where the Jews moved into the south and cleaned up?
The Euro has been saved yet again! /sarc
Yep, at the cost of........German export?!
dupe
Phew, I feel much better now. So does EURUSD?
Strange how it took several minutes for USDJPY to ramp as well ...
But now I really feel better.
Let's hear it for the 70's!
.... and the crowd goes wild. This has to be "good news"? Eh? http://www.youtube.com/watch?v=IPNyU0a2ko8
I wonder how many times Draghi will say downside risks lol.
Oh snap! The Draghi surpised my .01%. I was hoping for a rate cut this summer.
Amazing how long people are putting up with this crap.
0.50%. Cool. New mortgage for me then.
Wait, what? You mean to say I can't get 0.5%?
Ofcourse Draghi is going to target SMEs! MOAR MOOAAAR MOOOOOOOOAAAAAAAAAAAAAAAR!!!!
https://www.youtube.com/watch?v=C1bJnEpUk3A
The sooner we can just get to 0% across the board, and just run all the banks on hot free money injections alone, the better!
Why doesn't the Fed just give us a link to "Print your own Money" website.
Narrowing the spread beween unrewarded deposits and borrowing rates should, in theory, increase credit availability. But is it not that funds are trapped in corporate accounts? Is lending not being impaired by, say, floating interest rate risks and incredible spreads? Are the periphery's banking systems ready to lend on fixed interest?
To lower spreads over floating rates, banks must ensure returns that offset spread revenues - and here, the deposit rate at 0 and lower borrowing costs, position banks to guarantee returns on liquid instruments, say lending securities to money market funds engaging in repo, the game in town with so much liquidity available (and US/Japan yields in downward hist trend).
For the periphery, it matters little Euribor is lower: yes, existing investments are less-burdened but incoming investors are bound to resist variable interest rate loans with such low interest rates (in the medium term, it shall go up, right?)
Contrast, say, Spain and France spreads:
http://www.ecb.int/stats/money/surveys/lend/html/index.en.htmlOn SMB loans, here's an interesting BBVA page (in Castillian): https://www.bbva.es/productos/ficha.jsp?codigo=t000000082&banco=0182&tip...
There's zero chance that lowering rates will help the periphery turn liquidity into CapEx investment and new jobs. It might help make the EUR less attractive, which might (theoretically) increase exports for the periphery, if it had exports. But the liquidity is already there, credit creation is unattractive to those who have the liquidity, and there's little guarantee that anything lent out will ever be repaid. That lack of confidence is a big problem.
Another, especially for Spain, is that the regulatory climate is hostile to new business. It takes a month to get through the paperwork for starting a company, headed up by a three day application process for the paperwork to ensure that your company has a unique name ffs; the full month of paperwork costs something like thousand Euros. Credit availability is only one barrier to entry in the market; no one will be applying for loans, though, if they can't get past the regulatory hurdles to start businesses.
Absolutely, regulatory hurdles dampening efforts and chilling engines the ECB is attempting to warm up. The 2014-bound policy the ECB premiered today could pur pressure on short term interest rates to kickstart lending.
Part of what is happening in Europe is also the result of recent, shaky reforms on Public Administration and education: most Southerners are simply not educated enough to understand the value of, say, respect for Law and Public Institutions. Social cohesion is incredibly low in countries such as Portugal, Greece, perhaps Spain: it is mostly due to low available income to purchase imported goods. Recall Portugal defeated a dicatatorship as recently as 1974, Greece's referendum to democracy happened in the same year and Spain's Franco died in 1975.
Of the three, Spaniards did not revolt against its Government and that has much to do with the credibility of State institutions, and Law in general, in these countries. It is a sorrowful act to listen to fellow countrymen saying "Thief, go home" to men and women who work so hard to recover countries with 11 million mobile phones for 10 million people, thousands of cars (and road kms) or corrupt politicians siphoning money abroad; it's harder even to know these are their true opinions.
But hey, "great food"
Bullish #fistpumps by Hugh Hendry this AM.
I wish I was also a millionaire, because I would of bet on the same thing (ECB cutting rates).
They have to, in order to protect their banking buddies, sacrifice the currency to the inflation gods.
I was gonna mention Monsieur Hendry, this is KerChing!! v2.0 for him isnt it
More petro for Gold. Thanks!