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ECB's Mario Draghi Press Conference Live Webcast
LTRO changes, collateral expansion, other? What will the ECB undertake to extend and pretend today? Find out at the ECB's conference today.
Key Headlines:
- Will conduct two LTROs, with 36 month maturity with option of early repayment. First will be allotted on December 21, 2011, and will replace October 6, 2011 LTRO. This is more than the expected 2 years.
- ECB will ease collateral criteria for loans to banks. Will reduce rating threshold on ABS collateral
- National Central banks can accept credit claims such as bank loans
- Will reduce the reserve ratio from 2% to 1%, which will free up collateral in money markets
The kicker:
- DRAGHI SAYS ECB NON-STANDARD MEASURES ARE TEMPORARY IN NATURE
And forecasts:
- ECB SEES 2012 GDP GROWTH OF -0.4% TO 1.0% VS 0.4% TO 2.2% - we now have recession.
As for inflation:
- ECB SEES 2012 INFLATION OF 1.5% TO 2.5% VS 1.2% TO 2.2%
- DRAGHI SAYS HIGHER OIL PRICES PUSH UP INFLATION PROJECTIONS
So recession with higher inflation?
Hello stagflation!
And what is killing the EURUSD in the last 5 minutes:
DRAGHI SAYS HE DIDN'T SIGNAL MORE BOND PURCHASES LAST WEEK
Oops
Complete Draghi prepared remarks:
Mario Draghi, President of the ECB,
Vítor Constâncio, Vice-President of the ECB,
Frankfurt am Main, 8 December 2011
Ladies and gentlemen, the Vice-President and I are very pleased to welcome you to our press conference. We will report on the outcome of today’s meeting of the Governing Council.
Based on its regular economic and monetary analyses, the Governing Council decided to lower the key ECB interest rates by 25 basis points, following the 25 basis point decrease on 3 November 2011. Inflation is likely to stay above 2% for several months to come, before declining to below 2%. The intensified financial market tensions are continuing to dampen economic activity in the euro area and the outlook remains subject to high uncertainty and substantial downside risks. In such an environment, cost, wage and price pressures in the euro area should remain modest over the policy-relevant horizon. At the same time, the underlying pace of monetary expansion remains moderate. Overall, it is essential for monetary policy to maintain price stability over the medium term, thereby ensuring a firm anchoring of inflation expectations in the euro area in line with our aim of maintaining inflation rates below, but close to, 2% over the medium term. Such anchoring is a prerequisite for monetary policy to make its contribution towards supporting economic growth and job creation in the euro area.
In its continued efforts to support the liquidity situation of euro area banks, and following the coordinated central bank action on 30 November 2011 to provide liquidity to the global financial system, the Governing Council today also decided to adopt further non-standard measures. These measures should ensure enhanced access of the banking sector to liquidity and facilitate the functioning of the euro area money market. They are expected to support the provision of credit to households and non-financial corporations. In this context, the Governing Council decided:
First, to conduct two longer-term refinancing operations (LTROs) with a maturity of 36 months and the option of early repayment after one year. The operations will be conducted as fixed rate tender procedures with full allotment. The rate in these operations will be fixed at the average rate of the main refinancing operations over the life of the respective operation. Interest will be paid when the respective operation matures. The first operation will be allotted on 21 December 2011 and will replace the 12-month LTRO announced on 6 October 2011.
Second, to increase collateral availability by reducing the rating threshold for certain asset-backed securities (ABS). In addition to the ABS that are already eligible for Eurosystem operations, ABS having a second best rating of at least “single A” in the Eurosystem harmonised credit scale at issuance, and at all times subsequently, and the underlying assets of which comprise residential mortgages and loans to small and medium-sized enterprises, will be eligible for use as collateral in Eurosystem credit operations. Moreover, national central banks will be allowed, as a temporary solution, to accept as collateral additional performing credit claims (namely bank loans) that satisfy specific eligibility criteria. The responsibility entailed in the acceptance of such credit claims will be borne by the national central bank authorising their use. These measures will take effect as soon as the relevant legal acts have been published.
Third, to reduce the reserve ratio, which is currently 2%, to 1%. This will free up collateral and support money market activity. As a consequence of the full allotment policy applied in the ECB’s main refinancing operations and the way banks are using this option, the system of reserve requirements is not needed to the same extent as under normal circumstances to steer money market conditions. This measure will take effect as of the maintenance period starting on 18 January 2012.
Fourth, to discontinue for the time being, as of the maintenance period starting on 14 December 2011, the fine-tuning operations carried out on the last day of each maintenance period. This is a technical measure to support money market activity.
A detailed press release will be published at 3.30 p.m. today on the ECB’s website. As stated on previous occasions, all the non-standard monetary policy measures are, by construction, temporary in nature.
Let me now explain our assessment in greater detail, starting with the economic analysis. Real GDP in the euro area grew by 0.2% quarter on quarter in the third quarter of 2011, unchanged from the previous quarter. Evidence from survey data points to weaker economic activity in the fourth quarter of this year. A number of factors seem to be dampening the underlying growth momentum in the euro area. They include a moderation in the pace of global demand growth and unfavourable effects on overall financing conditions and on confidence resulting from ongoing tensions in euro area sovereign debt markets, as well as the process of balance sheet adjustment in the financial and non-financial sectors. At the same time, we expect euro area economic activity to recover, albeit very gradually, in the course of next year, supported by resilient global demand, very low short-term interest rates and all the measures taken to support the functioning of the financial sector.
This assessment is also reflected in the December 2011 Eurosystem staff macroeconomic projections for the euro area, which foresee annual real GDP growth in a range between 1.5% and 1.7% in 2011, between -0.4% and 1.0% in 2012 and between 0.3% and 2.3% in 2013. Compared with the September 2011 ECB staff macroeconomic projections, there is a narrowing of the range of the real GDP growth projection for 2011 and a significant downward revision of the range for 2012. These revisions mainly reflect the impact on domestic demand of weaker confidence and worsening financing conditions, stemming from the heightened uncertainty related to the sovereign debt crisis, as well as downward revisions of foreign demand.
In the Governing Council’s assessment, substantial downside risks to the economic outlook for the euro area exist in an environment of high uncertainty. Downside risks notably relate to a further intensification of the tensions in euro area financial markets and their potential spillover to the euro area real economy. Downside risks also relate to the global economy, which may be weaker than expected, as well as to protectionist pressures and the possibility of a disorderly correction of global imbalances.
With regard to price developments, euro area annual HICP inflation was 3.0% in November, according to Eurostat’s flash estimate, unchanged from the two previous months. Inflation rates have been at elevated levels since the end of last year, mainly driven by higher energy and other commodity prices. Looking ahead, they are likely to stay above 2% for several months to come, before declining to below 2%. This pattern reflects the expectation that, in an environment of weaker growth in the euro area and globally, underlying cost, wage and price pressures in the euro area should also remain modest.
This assessment is also reflected in the December 2011 Eurosystem staff macroeconomic projections for the euro area, which foresee annual HICP inflation in a range between 2.6% and 2.8% for 2011, between 1.5% and 2.5% for 2012 and between 0.8% and 2.2% for 2013. Compared with the September 2011 ECB staff macroeconomic projections, the projection ranges for 2011 and 2012 have been revised slightly upwards. This results from the upward impact of higher oil prices in euro terms, as well as a higher contribution from indirect taxes. The upward impact of these factors is expected to more than compensate the downward adjustments to profit margins and wage growth that are related to the downward revision of activity.
The Governing Council continues to view the risks to the medium-term outlook for price developments as broadly balanced. On the upside, the main risks relate to further increases in indirect taxes and administered prices, owing to the need for fiscal consolidation in the coming years. The main downside risks relate to the impact of weaker than expected growth in the euro area and globally.
Turning to the monetary analysis, the annual growth rate of M3 decreased to 2.6% in October 2011, after 3.0% in September. The annual growth rate of loans to the private sector, adjusted for loan sales and securitisation, increased to 3.0% in October, compared with 2.7% in September. As in the previous two months, the monetary data for October reflect the heightened uncertainty in financial markets.
On the counterpart side, the annual growth rates of loans to non-financial corporations and loans to households, adjusted for loan sales and securitisation, remained broadly unchanged in October, at 2.3% and 2.5% respectively. The unadjusted growth rates were lower, owing to substantial securitisation activities in October. Overall, the figures on lending do not suggest that the heightened financial market tensions have significantly affected the supply of credit in the period to October. However, given that credit supply effects can manifest themselves with lags, close scrutiny of credit developments is warranted in the period ahead.
Taking the appropriate medium-term perspective and looking through short-term volatility, overall, the underlying pace of monetary expansion remains moderate.
The soundness of bank balance sheets will be a key factor in reducing potential negative feedback loop effects related to tensions in financial markets, thereby facilitating an appropriate provision of credit to the economy over time. The agreement of the European Council of 26 October to proceed with the increase in the capital position of banks to 9% of core Tier 1 by the end of June 2012 should improve the euro area banking sector’s resilience over the medium term. In this respect, it is essential that national supervisors ensure that the implementation of banks’ recapitalisation plans does not result in developments that are detrimental to the financing of economic activity in the euro area.
To sum up, inflation is likely to stay above 2% for several months to come, before declining to below 2%. Intensified financial market tensions are continuing to dampen economic activity in the euro area and the outlook remains subject to high uncertainty and substantial downside risks. In such an environment, price, cost and wage pressures in the euro area should remain modest over the policy-relevant horizon. A cross-check with the signals from the monetary analysis confirms this picture, with the underlying pace of monetary expansion remaining moderate.
Turning to fiscal policies, all euro area governments urgently need to do their utmost to support fiscal sustainability in the euro area as a whole. A new fiscal compact, comprising a fundamental restatement of the fiscal rules together with the fiscal commitments that euro area governments have made, is the most important precondition for restoring the normal functioning of financial markets. Policy-makers need to correct excessive deficits and move to balanced budgets in the coming years by specifying and implementing the necessary adjustment measures. This will support public confidence in the soundness of policy actions and thus strengthen overall economic sentiment.
To accompany fiscal consolidation, the Governing Council has repeatedly called for bold and ambitious structural reforms. Going hand in hand, fiscal consolidation and structural reforms would strengthen confidence, growth prospects and job creation. Key reforms should be immediately carried out to help the euro area countries to improve competitiveness, increase the flexibility of their economies and enhance their longer-term growth potential. Labour market reforms should focus on removing rigidities and enhancing wage flexibility. Product market reforms should focus on fully opening up markets to increased competition.
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thanks!
3 year loans to banks....stop calling me every day! I have important things to do wankers!!!
Exactly. More free money to the same irresponsible criminal fucks that got us here in the first place. Prosecute the fucking fraud already and execute some of these fucks.
Italian Banker Guido: Hey,ah Mario! I ah need a some ah moonie.
Mario: Heyah Guioo, hows a da familiah, eh?
G: It's a goooda its a gooda.
M: Sos you wantsa a soomah ah monie?
G: Si. Whaddah I a have a ta give a you for ah dah collateralah?.
M: Ah any olda Italiana bonds ess ah Ho-K
G: Italiana ah bondsah? They's a Dog a Shit, Mario!
M: Si. So I cannot a take a Doga a Shit for collateral, so hows a about a Bag of a Imaginary Dog a Shit? Ho-K?
G: Si. Hey ah, youse a gots any bagas of a Imaginary Dog a Shit I you canna give to me to useah as a dah collateral?
M: Si. (giggling) All ah you wnata.
G: Hey! Eeeets a lott a like a Bingo! Everybody a big a winner!
M: Si! Everybody a Big Imaginary Winner of a a Big a Pile of ah Imaginary Dog a Shit.
Fin
whoever junked me is asshole. im thanking tyler for the press conference.
today he was SUPER MARIO.
from bloomberg:
French lenders’ capital shortfall shrank from the October estimate of 8.8 billion euros ($11.8 billion), the European banking regulator’s new test will show, a person with direct knowledge of the matter said.
The test will reveal that their capital situation improved thanks to profits in the third quarter, the person said, declining to be identified because the results, to be released later today, are not yet public. It will reflect efforts by BNP Paribas SA, Groupe Credit Agricole, Societe Generale (GLE) SA and Groupe BPCE, France’s four biggest banks, to cut sovereign debt holdings and other capital-sapping assets.
“French banks have published positive results, so their capital situation is bound to have improved,” said Alex Koagne, an analyst at Natixis SA in Paris. “Their real problem is liquidity rather than solvency
They can just start selling their citizens. French women are hot. Love the accent.
I met a cute French girl in DC recently. She even knew about their non Firch credit rating. I haven't met a Pretty American girl that knew our credit rating, ever!
I thought it was love. Lol
I miss the anxious 'priiiize stabeeeleeteee' guy!
Monotone Italian accent english ain't the same...
Or 3 year LTRO on the French women, so there is no war
Excuse my ignorance, but what is LTRO?
P.S. Eastern slavic women are the best.
+1 for the Eastern Slavic women. Balkans Slavic women are crazy, but they are the best
"The underlying pace of monetary expansion remains moderate"
Merkel Head to Head, HAHAHA
We have undertaken a considerable effort to push on the string with all our might.
We can accept fluff as collateral without inducing inflation. LOL!
Pop quiz, your squiddly genius; banks will take the FreEmOneY and:
a) Lend them to one of the other explosive-strapped canaries in the mine
b) Deposit them with the ECB as excess reserves
c) Purchase commodities that are rising with your efforts to debase all fiatscos
d) Purchase equities that are rising with your efforts to debase all fiatscosHas this guy just poured gasoline onto the raging bonfire of the fiat paper currencies ?
UNcertainty
Wait... gasp, gasp. This just in from the FT... what he meant to say was...
why bother when you can drop a lit cigarette onto flash paper?
lots of 'operations' something like open heart surgery with a letter opener.
loans will be used as collateral for small business and individuals.... isn't that how the mortgage implosion happened in USA?
reduce reserve ratio to 1% why not just pretend there is something there an make it 0
ugh by construction temporary in nature.
moderation in global demand growth
balance sheet adjustment like what finding billions that were not lost?
narrowing of range to realistic GDP?
risk in high uncertainty.... spill over to real economy (don't want your disease thank you)
indirect taxes?.... that wont last very long... dream on with that hope for increases in indirect taxation.
Fiscal Compact.... they are begging for a back door bail out and know it is an up hill battle with many national banks the taxpaying government. Fiscal Policies and new rules and commitments are not making any one happy. Which measures dear ECB?
confidence enhancing effect (confidence game? CON?)
she dragon!? Man, back when you were postin' I was just a tentative on-looker...
'balance sheet adjustment like what finding billions that were not lost?'
hehe... classic Marla
Gold should focus on falling from the sky in half-ounce coins and make us all rich...
All 7 billion
excuse my english
Sequencing extending to debt purchases a NO GO. I.e. Sell Mortimer Sell:)
Up to the plate: Debt deflation spiral? Yes indeed baby:)
Gold spiked to $1,757/oz on this 'fluff as collateral' announcement.
Another Goldman Sachs bankster. They need to rename the ECB to the Goldman Sachs European Bank.
Draghi calling for a "credible legal instrument" and system... he's got one if he checks the EU Constitution, it says "No Eurozone Bailouts" ...illegal ...got it tosspot?
(edit) ..then minutes later expresses his knowledge of it saying Euro bailouts are not permitted and the "no monetisation" is in the best tradition of the Bundesbank
So what was the EFSF fuss about then?!!
That leaves Draculer hoping for a "new Treaty" ...namely closer political integration or put another way, loss of sovereignty to a central Euro ivory tower to "restore confidence" in the markets. Bigger is better, less diversity trumps national independence. The EU: the exact opposite of the free market and its motto, another headline lie, "Strength through Diversity"
No QE Baby from Mario.
Ball back at 'cha BEN:)
that was a short lived green candle party in the ES
Great, the new relaxed stance will allow MBS to be used as collateral.
Old newspapers will also be accpeted.
Of course he did. ... no he didn't ... yes he did ... sure you did ... I might have ... yes I did ... yes I will.
Same old game plan. Sell the news.
EUR is saved, AGAIN TODAY for the second time! Rally on!
with this half QE measures which is supposed to save save banks, if i were the nation who is supposed to signover my sovereignity, i'd show the middle finger.
ECB just lost credibility by backdoor QE-ing... game of chicken all the way...
One self fulfilling prophecy, coming up.
Are you ready to RUUUUUUUUUUMMMMMMMBLLLLLLLLLLLEEEEEEEEEEEEEE:)
This guy Draghi is pretty smooth - I'll give him that.
Just said he was not going to buy all the bonds...BUT he has a new lending program that the banks can borrow the money to buy the bonds..like the USA...borrow at 1%...buy bonds at 6%....winning....how do I get an account with the ECB....I would buy gold...
"Break-up far fetched"
yes, sure, thats why Heidelberger has record orders
"It was the best of times, it was the worst of times."
Sing along everyone...
It's beginning to look a lot like Depression. Everywhere we go...
"Are primary mandate is price stability" therefore we wont monetise debt like the Fed!!
What is the Feds mandate again?
So what is driving GOLD to the mat?
Need to remove the rumor because Goldman was out of position, but we now have a benchmark on what a Draghi comment will net. Sell off paper gold and get into position with sovereigns refloat rumor.
Stupor Mario. Fail.
The ECB goes BERSERKE (a combiation of Berserk and Bernanke)
ECB Does Quantitative Easing, Eurozone Bonds Drop, Franco/German Proposal In Jeopardy
http://confoundedinterest.wordpress.com