Money Supply

Hello and welcome to today’s live blog on the European Central Bank’s press conference, which follows today’s governing council vote.

ECB president Mario Draghi will meet the press at half 1.

All times are UK time.

 

14.30 And that’s it for the final ECB presser of 2012.

The most important developments were the suggestions that a rate cut had been discussed (and that some members of the governing council had supported it at the December vote) and the “growth” downgrades.

14.26 The ECB president says its “pointless” talking about eurobonds now. Why so? Because it would be pointless to talk about mutualising risk before you have put in place rules that limit fiscal discretion. Eurozone members have to rebuild trust first. “It will become realistic when trust is re-established,” he says.

14.24 Here’s the ECB president’s opening statement.

14.22 The obligatory Ireland question. Here’s Mr Draghi’s thoughts on the latest goings-on in Dublin: “The new budget is the Reaffirmation of commitment of the Irish government of restoring fiscal and structural conditions.”

On the issue of Irish promissory notes, the president doesn’t budge an inch, saying the ECB can’t enter into an agreement viewed as monetary financing. Quelle surprise.

14.10 We’re about 40 mins in and only now have we had a question on Spain and the OMT. Judging by today’s presser, banking union is the new hot topic.

14.08 Mr Draghi says that the EU banking regulator needs to have a mandate to supervise all banks if needed, though the “intensity” of this supervision will diminish for smaller banks. At that point it seems that the ECB would leave more in the hands of national supervisors.

14.07 The ECB president thinks that the effects of ultra-loose monetary policy will begin to be felt by eurozone households and businesses during the latter half of 2013.

14.04 Mr Draghi is asked to defend himself against accusations that his membership of the G-30, a group of high-ranking finance officials and bankers, gives rise to a conflict of interest. The defence is along the lines of ‘Hey loads of other central bankers are members, so what’s wrong with me joining the club?’ Not convincing.

He says it is news to him that the group is financed by Goldman Sachs.

14.01 The euro has dipped on the suggestion that members of the governing council may have voted for a rate cut:

14.00 Mr Draghi plays down the importance of the “growth” downgrades, saying that the big picture hasn’t changed. THe medium term outlook remains the same

The ECB president also notes that the announcement of the OMT programme has not just impacted bond prices; it has also boosted stocks.

13.52 Mr Draghi indicates a rate cut was discussed. But the “prevailing consensus” was to hold policy. Does “prevailing consensus” mean that some on the governing council wanted to cut?

13.48 First question addresses recent events in Italy, where Silvio Berlusconi has withdrawn his support for Mario Monti. Mr Draghi parries it.

Second one is on banking union. The ECB president says he’s “confident” that the upcoming discussions will go well. Hmm….

The FT’s Brussels bureau chief Peter Spiegel is not so confident:

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13.47 Here’s the FT’s markets editor Ralph Atkins’ take on the “growth” downgrades:

13.45 Mr Draghi says he “looks forward” to eurozone leaders agreeing a road map towards banking union.

13.43 Inflation has been “elevated for some time”, but is expected to fall below 2 per cent in 2013. Inflation should remain in line with price stability over the forecast horizon.

13.42 Here’s a summary of the new “growth” projections.

As expected, the ECB’s growth projections for this year and next have been revised downwards.

Growth is now expected to be in the range of -0.6 per cent and -0.8 per cent -0.4 per cent and -0.6 per cent in 2012, -0.9 per cent and +0.3 per cent in 2013, and 0.2 per cent and 2.2 per cent in 2014.

Economic weakness is expected to extend into next year on the back of balance sheet adjustments and economic uncertainty weighing on consumption and investment. Later in 2013, growth should recover.

The ECB will continue to hold special three-month auctions of its loans until July 9 2013. The auctions were introduced to combat a lack of liquidity during the crisis.

13.33 After the usual chorus of camera clicks, ECB president Mario Draghi takes his seat. For those of you keen to see Mr Draghi in action, here’s a link to the webcast.

13.23 What can we expect from today’s presser? Besides the growth and inflation forecasts, we could also get some changes to the ECB’s collateral rules – ie, the assets that the central bank will accept in exchange for its cash might change.

One of the issues likely to come in the Q&A session is banking union. The European Central Bank is set to take on responsibility for supervising eurozone banks. But the road toward banking union looks set to be a long one. For more on banking union, the FT has an In-depth page here

On the economy, there was some good news today fromGermany. Factory orders in the eurozone’s largest economy rebounded in October by much more than expected.

13.15 Hello and welcome to today’s live blog. The ECB’s governing council held rates today. Here’s the FT’s Frankfurt bureau chief Michael Steen’s take on the vote:

Michael Steen: The European Central Bank kept its main refinancing rate on hold at 0.75 per cent on Thursday, resisting calls for a cut as the 17-nation currency bloc battles economic recession, public spending cuts and weak growth prospects.

Mario Draghi, ECB president, was due to give more details about the governing council’s discussion surrounding the rate decision at a press conference at 1.30pm.

Mr Draghi was also due to release the bank’s quarterly eurozone growth forecasts, which many external economists expect will be downgraded from its previous forecast of contraction this year and 0.5 per cent growth next year. The bank is also likely to say that inflation expectations remain within the range of 2 per cent over the medium term laid down in its mandate.

The ECB has calmed financial markets in recent months by promising to step in and buy the bonds of eurozone countries with distressed bond markets, if the bank believes the market is speculating on a eurozone break-up and if the country concerned commits to a degree of fiscal oversight.