The ECB lowered its benchmark interest rate at 0, 05 to 0% by extending the quantitative easing program and launching a new bank refinancing program. But the promise has lowered its benchmark interest rate from 0.05 to 0%, the interest rate on loans in the future rate freeze only strengthened the euro against the dollar
The European Central Bank (ECB) – from 0.3 to 0.25% and the deposit rate – from minus 0.3 to minus 0.4%, according to the regulator. The decisions will come into effect from 16 March.
Also Thursday, the ECB decided to extend the policy of quantitative easing (QE) to € 60 billion per month to € 80 billion. Launched in January 2015, a program to buy up debt bonds with an investment rating, as expected, is to bring to the economy of the eurozone countries is not less than € 1,1 trillion of liquid funds. Now the list of assets to buy will be further included eurobonds issued by non-banks in the eurozone. Adjusted program will be operational from April.
The regulator also announced the launch in July 2016 a series of four targeted long-term bank refinancing operations (TLTRO II) with a maturity of four years.
Such measures The ECB expects to spur the growth of the European economy and stimulate inflation, which is still nedotyagivaet to an acceptable level for developed economies to 2%. In January 2016, inflation in the euro area was 0,3%.
As noted by the ECB head Mario Draghi at the press conference immediately after the meeting, the practice of negative interest rates has already shown its effectiveness. “The experience we gained by introducing negative rates, has been very positive,” – he said,
The basic interest rate of 0.05% in the euro area held in September, 2014.. According to Draghi, the rates will stay low for a long time. “We see no need for a further lowering of interest rates. unless, of course, not new facts will make changes in the picture “, – transmits his words of The Guardian. According to Draghi, negative rates are not hit by the banking sector.
The reaction of markets
The ECB’s decision provoked a rise in European stock markets. According to the Financial Times, the German Dax stock index rose by 1.69% and the Italian FTSE MIB – by 2.67%. According to Reuters, the British FTSE 100 index rose by 0,7%.
Immediately after the announcement of the decision of the ECB’s value of the euro fell from $ 1.0975 to $ 1.0836, but after Draghi said, that the regulator has no plans to further reduce rates, the euro rose to $ 1,11
The euro initially fell and against the ruble. At a minimum exchange rate was 75.88 rubles., The lowest since December 24, 2015 and 2.35 rubles. below the level of the close of business on March 9. Then, after the dollar ruble fell sharply – up to 79.08 per euro – and then just played back. At 18:00 MSK pair ruble / euro was quoted at 78,57.
Races took place amid falling oil prices. During today’s trading on the stock exchange ICE the price of a barrel of Brent crude oil fell to $ 40.4, which is 1.63% below the closing yesterday’s trading.
Revolution not happened
The ECB’s decision came as no surprise to market participants. On the one hand, surveyed by Bloomberg experts predicted exactly this development: further reduction of deposit rates and an increase in the program of “quantitative easing» (QE) for the redemption of bonds. A similar opinion is held on deposit rate to experts polled by Reuters. Analysts ECBWATCH expect rate cuts to minus 0,5%.
For a similar news from the Frankfurt analysts are ready in December. At the previous meeting of the ECB’s December 3 regulator lowered the deposit rate for the same 10 basis points, and now (from minus 0.2% to minus 0.3% per annum), but refused to expand the volume of QE (albeit extended its timeline for the year) . Regulator’s decision not to throw in the additional volumes of cash market (against the expected expansion of QE) expectedly led to the explosive growth of the euro. On the next trading day, he played monthly fall against the US dollar, up from $ 1.061 to $ 1.091 per euro.
The stock market while, in contrast, experienced a sharp fall in two months. For December 3 German DAX index and France’s CAC 40 tumbled 3.6% each, Britain’s FTSE 100 fell 2.3% and the Spanish IBEX 35 – more than 2.4%. Then the experts investment firms Trustnet Direct and CMC Markets, surveyed by the British The Guardian, argued: the market expected from Draghi more serious attempt to restart the European economy
«quantitative easing policy pursued by the ECB, is effective in terms of the effect on. the dynamics of the euro against the dollar “, – said the chief economist at Alfa Bank, Natalia Orlova. Managing assets in the Criminal Code “Capital” Andrew Vallejo-Roman, on the contrary, believes that the long-term effect, it will not be because the market expected more volume of bonds redemption. “Caution is the regulator will not allow the euro weaken in the medium term. It is hard to expect the end of the year some very decisive steps to build the money supply “-. He believes
« Response measures exceeded the expectations of the ECB, – quotes the words of The Guardian a senior economist at UBS Reinhart Clusaz. – We expect soft measures: increase the quantitative easing program and the inclusion of corporate bonds in the list for the purchase of assets. But the solution has exceeded our expectations. »
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