How will sovereign bonds will be handled in the euro area’s forthcoming banking health checks? This is a vexed question and markets seize ravenously upon any clues.
Mario Draghi, the European Central Bank’s president, offered a flicker of information on Tuesday in a letter to Sharon Bowles, the chair of the European Parliament’s Economic and Monetary Affairs committee. Sovereign exposures will indeed bit included in the stress test, he said – confirming previous declarations from the ECB.
However, it is “not foreseen” that bonds in the held-to-maturity category of banks’ books will be adjusted to reflect market valuations – otherwise known as marked to market. That will come as a relief to banks that are holding portfolios that have slumped in value, but analysts caution that it is far too soon for lenders to relax. Read more
ECB president Mario Draghi started his monthly press conference shortly after 1.30 GMT. Earlier, as expected, the ECB left rates on hold. Follow the questions and reaction live here with capital markets editor Ralph Atkins and Emily Cadman
European Central Bank presidents, current and former, are renowned for their fondness to “never pre-commit”. Even when the ECB opted to jump on the forward guidance bandwagon, it did so in a much more halfhearted way than its counterparts.
However, a few months ago Mario Draghi made quite a firm pledge to tell us by the end of the autumn how the ECB intended to go about producing an “account” of the governing council’s policy deliberations. Will Mr Draghi end up breaking his promise? Read more
Today the ECB cut its benchmark main refinancing rate to 0.25 per cent.
ECB president Mario Draghi is giving his monthly press conference
Follow the questions and reaction live here with capital markets editor Ralph Atkins and Emily Cadman
By Emily Cadman and Claire Jones
Hello and welcome to the FT’s live blog on Mario Draghi European Central Bank’s press conference.
Earlier the ECB kept its main refinancing rate on hold at 0.50 per cent as it tries to support the eurozone’s fledgling recovery. Mr Draghi will discuss the rate decision at a press conference in Paris at 1:30pm BST, when he is also expected to address the central bank’s stance on providing more liquidity to commercial banks as the maturity of two previous sets of cheap loans looms.
Blue sky thinking reaches Frankfurt (Getty)
Mario Draghi, European Central Bank president, has revived the idea of “reform contracts” — a policy that emerged in Brussels wonk circles last year and entails the EU contractually binding eurozone countries to economic reforms.
Speaking in Berlin on Monday, Mr Draghi told an audience of businesspeople that the eurozone needed two things to achieve sustainable growth: stabilisation and greater competitiveness.
To achieve the latter, he mentioned the need for “better ways of measuring economic performance – for example, more structural indicators of competitiveness.” And went on: Read more
Jackson Hole, the nearest thing on the central banking calendar to Davos, is upon us again, with some of the world’s most senior monetary officials set to head out to the upmarket Wyoming resort over the next few days.
Unlike the annual bash in the Swiss Alps, however, Jackson Hole, which kicks off on Thursday evening and closes on Saturday night, is usually a bit more than a talking shop. Of late, it has been the venue of choice for Fed chair Ben Bernanke to offer clues on where policy is heading.
But, while tapering looks like it is almost upon us, those hoping for more detail on the pace at which the US central bank will slow its asset purchases will not get it from Bernanke this weekend. Read more
Not the ECB (Getty)
The Bundesbank has weighed in on what forward guidance means for the European Central Bank and if you want the short version it boils down to: we have not forgotten about inflation.
The ECB pledged in July to keep interest rates at or below current levels “for an extended period of time,” which, as we’ve noted before has caused some confusion as to what precisely it means.
According to Germany’s central bank, that promise does not actually mean that interest rates cannot rise or that they will necessarily remain low for a long time. As it writes in its latest monthly report:
The decisive point in correctly interpreting this statement is that it is conditional on the unchanged obligation of the Eurosystem [the ECB and the eurozone’s 17 national central banks] towards its mandate of maintaining price stability (which means, operationally, medium term inflation that is below, but close to 2 per cent)… It follows that the ECB’s governing council has not bound itself. If higher price pressures become apparent in future compared to those expected now, forward guidance in no way rules out a rise in interest rates.
It’s the first day of August, traditionally the month many Europeans go on holiday, and there was a definite end-of-term feeling to the European Central Bank’s monthly press conference.
The bank unsurprisingly decided to keep its interest rates on hold and Mario Draghi, president, described data that “tentatively confirm the expectation of a stabilisation in economic activity as low levels”. So they see improvement, but they’re not calling the recovery just yet.
What else did we learn? Read more
Hello and welcome to our live blog on the European Central Bank’s press conference. The central bank did what markets expected and kept rates on hold. But ECB president Mario Draghi might offer some clues on what’s to come from the central bank in the months ahead and investors will also be looking for any comments on whether the ECB might start publishing the minutes from its governing council meetings. Draghi is due to begin speaking at 13.30 UK time.
By Claire Jones and Lindsay Whipp