With the eurozone facing the threat of a prolonged period of “low-flation”, the European Central Bank has been urged to stretch its monetary policy toolkit further and deploy more unconventional measures. One widely flagged option would be to cut the interest rate that banks receive for parking their money with the central bank to below its current zero level. Frankfurt would then replicate an experiment first tried by Denmark’s central bank, which in 2012 cut its deposit rate to -0.20 per cent.
As of Thursday, however, Denmark is no longer a valid comparison. The Danish National Bank has announced that, with effect from Friday, it will raise its deposit rate by 15 basis points to 0.05 per cent (it had already increased it to -0.10 per cent in January). Meanwhile, the central bankers in Copenhagen left the lending and the discount rate unchanged at 0.2 and 0 per cent respectively. Read more
Mario Draghi has warned that, though unlikely, Europe’s fledgling economic recovery could be derailed by the turmoil in Ukraine.
While the direct financial and trade linkages between the European Union and Ukraine are small, the ECB president told lawmakers in Brussels yesterday that the geopolitical dimensions of the tensions could have a strength that goes beyond mere statistics on capital and current accounts.
One of the most important economic aspects of those geopolitical dimensions is the supply of Russian gas to the EU.
The EU’s reliance on Russia has dwindled over the past decade, but it still matters. The relationship still accounts for 30 per cent of all gas imported into the bloc and when Gazprom cut off Ukraine in 2009, the disruption to energy supplies hit the EU hard. And though the EU is now less reliant on receiving its gas via this route, there’s no way of Russia using the gas button against the Ukraine without it having some impact on the rest of Europe.
The popularity of this tweet by Reuters’ Jamie McGeever highlights the interest this geopolitical dimension has received:
But there are good reasons to bet against Russia turning off the gas tap, regardless of whether or not one believes relations with the EU are the direst since the Cold War. Read more
January’s eurozone inflation number, out earlier on Monday, showed price pressures in the currency bloc are not quite as subdued as first feared, registering 0.8 per cent – a touch higher than Eurostat’s initial estimate of 0.7 per cent.
It’s hardly a game changer: inflation is still less than half the 2 per cent target. But the slightly better figure will reduce pressure on the European Central Bank a little after it faced renewed calls to ease policy following the release of the flash estimate.
However, the detail of this morning’s release suggest disinflationary pressures might be even worse than feared. This excellent chart from Marchel Alexandrovich of Jefferies International shows why: Read more
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
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
Mario Draghi, the European Central Bank president, pulled off the feat of sounding incredibly doveish today while keeping rates on hold and actually making sure his room for manoeuvre remains as wide as possible. Here are five quick takeaways from the press conference following this month’s meeting: Read more
Hello and welcome to the FT’s live blog on the European Central Bank’s rate decision and press conference. All eyes on Thursday are on the ECB and what it has left in its tool kit as gloomy data throws further doubt on the recession-bound eurozone economy.
Many economists are expecting what would largely be a symbolic cut in interest rates. The governing council’s vote is due at 12.45 (BST) and ECB President Mario Draghi will meet the press at half past one.
By Claire Jones and Lindsay Whipp. All times are UK time.
Mario Draghi, ECB president. Image by Getty.
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. Read more