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THE EUROPEAN CENTRAL Bank stepped up efforts to kickstart chronically low inflation in the euro area, cutting a key interest rate and extending its controversial asset purchase programme.
At the ECB’s last monetary policy meeting of the year, the governing council decided that the key deposit rate, already in negative territory, would be lowered further to -0.30%.
The deposit rate is normally the interest banks would receive from parking cash overnight at the ECB. But it has been in negative territory since June 2014, meaning banks effectively have to pay the ECB to hold their funds.
The idea behind the negative interest rate is to persuade banks to lend the money to businesses and households rather than store it at the ECB.
The ECB held its other two key rates – the refi and marginal lending rates – unchanged at 0.05% and 0.30% respectively.
At his traditional post-meeting news conference, president Mario Draghi announced a beefing up of the bank’s controversial money-creation programme, known as quantitative easing (QE).
In a bid to bring eurozone inflation back up to levels conducive to healthy economic growth, the ECB has already unleashed an unprecedented series of measures.
It has slashed borrowing costs, made vast amounts of cheap loans available to banks and most recently embarked on a programme to buy around €60 billion of sovereign bonds each month until at least September 2016.
But inflation across the eurozone is still stubbornly low, standing at just 0.1% in November, far below the ECB’s target of just under 2.0%.
Santa Mario and his gifts
In a bid to correct this, the ECB decided to extend the purchases to March 2017 and possibly beyond and to widen the net to include other categories of bonds, Draghi said.
He insisted that the measures were working and that was why the ECB had decided to step up the QE programme. The ECB was “doing more because it works, not because it fails,” he added.
“Santa Mario did not turn into the Grinch, the Christmas monster. However, (he) left many market participants disappointed like small kids who receive less and smaller presents than expected on Christmas eve,” said ING DiBa economist Carsten Brzeski.
Jonathan Loynes at Capital Economics also said the ECB had “failed to live up to its own hype”.
“Of course, it’s possible that the slightly better news on the economy over recent weeks persuaded the governing council that more aggressive action was not necessary. And Draghi has left the door open to further policy loosening in the future,” he said.
The euro has recently dropped against other major currencies, including the US dollar, although it bounced back today after Draghi failed to meet expectations of further devaluation measures.
- © AFP 2015, additional reporting TheJournal.ie staff
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No use to the real economy if the banks are borrowing at record low interest,and putting the money into govt bonds instead of the economy…maybe if banks were stopped from parking it,we might see some benefit.
That’s the problem with all of these programmes, QE etc, the money has been pumped into the financial system and stayed there to make the rich ever richer and drive up stocks prices in another bubble. Imagine if this kind of money was spent on capital projects and real job creation like the New Deal in the thirties, but I suppose socialism is only for the rich.
ECB are doing all they can, they’re practically begging european governments to pick up the slack but neocon thinking seems to pervade fiscal policy at the moment. It’s been obvious for years that monetary policy alone wouldn’t be enough to sort out Europe’s problems, but that doesn’t gel with the ideologies of Europe’s current political elite so we were all made to suffer
Ciaran,
The Eurozone nations have ceded monetary sovereignty and so can’t pick up the slack and implement counter cyclical stimulus spending which in any case is effectively prohibited under the rules of the currency union e.g. Fiscal compact.
There can never be a shortage of a fiat currency like the Euro at a macro level so it’s clear that austerity and deprivation is a policy choice at national government and EU level. There are no shortages of any of the real resources (e.g. energy, food, material to build housing etc.) to eliminate poverty across the EU. The authorities pretend that there is lack of money to meet the needs of the of the people which serves the interests of private capital.
Broadly agree, I only posted cause there are a load of people bashing the ECB when they’re the only people trying anything. QE and interest rate reductions are a tool meant to be used in concert with other tools to achieve results. It’s like the eurozone is a car with a flat tyre, The ECB keep handing the Eurozone governments the tools they need to change the tyre but they insist if we just keep on driving it’ll eventually just re-inflate on it’s own. Meanwhile the financial industry is picking up all the discarded jacks and wrenches and making off like bandits
The public and the economy serve the banks, it is not the other way around. Private banks are more powerful than governments, they call the shots.
No this World is changing the rich will get richer the poor will get poorer, let them at it. The Golden circle my arse. I hope they live long enough to see their error but i think if they lived till they were 200 they wouldn’t. Now Denis has sold his petrol stations, and the Couch Tard own so much fuel thats one commodity in the bag now the next one.
EU,ROME and a Day.IRISH people must DEMAND a Referendum on our continued Membership of this Sinking EU ship,you have an opportunity on February .DONT WASTE IT GUYS .TELL these Political Classes WE WANT OUT .
Ciaran
The ECB are at the heart of problem. They are bankers.
This is an excellent summary of the Eurozone mess.
Brandy
I voted twice to not be governed by these people and their, what now has to be said, fascist ideology. I blame the people who voted no to Lisbon the first time and then got scared, changed their minds and voted yes the second time. It just proves Democracy doesn’t really work if a majority of stupid people can overrule rational people who didn’t want to cede control of the country to 27 unelected commissioners with which we have no power to remove. We need a Constitutional Republic with a fixed body of law that is not subject to the whims of the majority, because a lot of the time, the majority is a dumbass.
Mike that post complains about the ECB not doing exactly what they’re doing now and have been for months, they came around late but at least they came around.
The only thing the eu is going to do is draft us in to war time we got out.
I’m losing faith in the Euro
I have lost faith in the Euro , European Government and it’s institutions.
Why have you lost faith in europe. We live in one of the most stable and safe regions in the world. We have freedom of speech and liberty. We are protected and rich. Some people are never happy. Ireland was a chronic cesspit of poverty before we joined Europe.
The brits will bring down the European super state and not before its time.
It’s a stinking cesspit of corruption and utter incompetence.Liberty and freedom of speech are being ripped from us daily.I am certainly not rich but neither do I want to be.I was once happy burying my head in the sand but I’ve woken up not to believe the spooned bullshyte they want us to see.
Be careful what you wish for Sri Oisin
Losing faith, I lost faith in it years ago, time to get out before it destroys is
Free speech me arse
In fairness its not all that bad.. Ireland is a fairly wealthy country, compared to rest of world.. Sure we have a lot of problems, so do most countries.. There are plenty of countries with better weather and perhaps lifestyle, but not as safe, or I wont earn as much.. so don’t be so quick to bash.
@Mick, if you want to leave, you know where the airport is right?
@cholly Have you been in a coma for the last 8 years?
@Destroyer This country is buried under a mountain of private bank debt that has been placed upon the publics shoulders. Any real tangible wealth in this country has been either given away to some multinational corporation for a fraction of what it is worth, or taken by the oligarchy with government approval. We live in a Plutocracy.
I’l call you Jolly you are so cheerful. Hee hee
Free Speech = The New Racist Activity .Wake Up Guys .Speak Up
People should read this to get a proper and accurate summary of the Eurozone mess to which we are inextricably linked:
Now it’s just a chronic cesspit…
@Len, depends what you do here. I have a good job and am better off than when I recession started :P
This coming from the man who helped cook the books for Greece all those years ago, making Greek finances look in tact to join the euro when in reality Greece wasn’t doing as well as he claimed.
All to please the bundesbank
Negative Interest Rates, the sign of a f*cked up economy. The market should determine interest rates, not the criminals in the ECB. It’s like using Sellotape to fix a massive crack in a dam. It’s only a matter of time till it all comes crumbling down.
Brexit will see our exit…
Hopefully, but do you know any political parties advocating an Irish exit? We don’t have a UKIP here
Thank Christ we don’t have a UKIP here
How about an EIREXIT
If we did have a UKIP we would also have a referendum on Ireland’s EU membership. Let me guess, you think UKIP are racist right? You’re reading the wrong news
Good old Mario, the Lizard King. He has all the answers, we’re in really safe hands. After all, look how successful his predictions and remedies have been so far.
Take a read of this Rashers:
Mike, look at this, a POLITICAL UNION IS ON THE MENU?
https://www.rt.com/shows/sophieco/320457-eu-currency-economy-crises/
Rasher you have been googling “Seraphim angels LIZARD” or “david icke” again, yikes… lol.
Michael
Hans Werner Sinn is very much part of the problem and his analysis is so neoliberal partisan it’s hard to know where to start. He talks a lot about Greece, blaming them for problems for which they are only the most visible symptom of the Euro systemic problems and not the cause.
Transpose the problem to Ireland. What would happen if every region withing Ireland was obliged to operate to Euro system financial and accounting rules? We would quickly find any number of ‘Greeces’ among the regions unable to compete in economic terms with our main economic centres like Dublin. If we then adopted the Austerity (internal devaluation) policies, many regions would become economic basket cases with mass unemployment, massive debt etc on the scale of Greece.
By whatever means, the asymetry of economic productivity – if only for asymetry in basic infrstructure facilities like ports – has to have a facility for monetary flows to balance in the long term. All countries are like this, and if they share a common currency, they can only function in the long term by means of transfers between regions. But we should never forget that this confers significant benefits for all parties, not just the ‘weaker’ ones. Because the latter are important markets for the stronger ones. The logical conclusion of not enabling trade and money to cycle adequately is for regions to become self sufficient in everything and trade virtually nothing. There is then no monetary circulation imbalance. Obviously, for most countries that would make us all less prosperous.
At the end of the day, the decision comes down to politics, natural national affinities and the scale of financial union we feel is most mutually beneficial before separating off and using separate currencies able to use varying exchange rates to balance trade flows.
But at present, all Sinn and his master Schauble want to is to do is erroneously blame governments’ spending, when the real issue is (mostly natural) trade imbalances. Then apply more austerity which in fact destroys any chance of evening out ‘competitiveness’ differences. But this attack on returns to labour does serve to enrich capital owners, and enables Germany’s non-EU exports to be ever more attractive using an artificially lower currency value than they’d have on their own.
In essence, it’s a neoliberal coup on behalf of the Capital owner class, centred around Germany, but with plenty of the rich in other countries happy to go along, so long as the social instability can be neutered by propaganda and security forces.
And I say it’s a coup, because ‘Optimal Common Currency Zones’ has long been studied, and the instigators of the Euro were told what would happen – exactly what we’ve seen – when the structure was proposed.
For a shared currency to work, it needs the kind of solidarity we have within nations, and a functioning system of democracy. We don’t really have the latter in our countries, and with Euro elites dominated by neoliberal (intellectually fraudulennt economics) thinking, political union would be advancing even faster to its neofuedal conclusion than at present. This is Schauble and Sinn’s intention.
IF proper welfare safeguards, and a ‘floor’ under labour incomes, via eg a Job Guarantee – Eurozone wide – a political union could work well. But with the present structure and capital captured politics, there’s no chance of that.
Mike, what gets me is Sinn says it outright in the interview, Germany wants a political union based in Berlin to handle the so called Euro problem. Ireland would be so small it would drown under all the other Eurozone countries and no one gets it, that is what gets me…
I agree Michael, it’s hard to see how any smaller/weaker countries would get much say in Sinn/Schauble’s union. Tho’ it’s not really about nation vs nation, rather elites in all countries vs ordinary citizens in all countries.
It is about profits for those based in the U.S. and for banks, hedge funders…
Nothing yet about TiSA Agreement or anything in the media about TTIP?
http://www.sanders.senate.gov/download/the-trans-pacific-trade-tpp-agreement-must-be-defeated?inline=file
TTIP is roughly the same as the TPP…
ALL ABOUT MONEY AND PROFITS in the end?
When you see the Count smiling from ear to ear be sure one of his hedgefund Banker buddies just got another few billion on the cheap from his 1.3 trillion QE scheme. Of course when the Count raise interest rates and it all comes crashing down all the hegefund lads and lassies along with giant corpos will have their money invested in real assets. Bail in galores as the banks raid whats left of peoples earnings to try and fake save the financial system. Wont happen your broke their rich and to cap it all , all that money printed will eventually have to be paid back by who by you and your children when they introduce the one world currency after the event. God bless the banking gods og no just bless the banking gods because them moneyjunkies are on a mission to replace the divine one. Kneel before the Count while he sucks your blood mwahahahahhah
Quantitative Easing another term for “Err lads we need to print a few bob” keep the interest rate down lads because that suits the German exports just fine as does a weak Euro. Who is going to buy all these Mercedes, audi’s, Porsche’s, BMW’s and VW’s? That would be the Chinese and the Yanks so let’s keep the incentive attractive. But what about the rest of the Euro zone? Sssshhhhh…..hush now.
Does this mean my tracker mortgage will be even lower… :-D
What’s a tracker mortgage ?
That rate went unchanged. They’re throwing money at the problem coz they can’t really bring that rate lower.
I wish !!!
Just got mine back after years of fighting the thieving illegitimate sons in PTSB…
My Son who lives in Switzerland said everyone in Ireland should put any money they save in Pounds or Swiss Francs, with time the Euro will be worth nothing.
Switzerland – the home of financial fraud ? It’s as bad as Draghi when it comes to making stuff up. ..
It looks like it took an awful lot of effort to produce that grin.
The guy has an impossible job, i’m sure he know it but he’s still trying to smash a round peg through a square hole.
Debt is the problem, and it will continue to be, until it is addressed.
All the free money (to some) and smoke and mirrors will not change that fact.
The Euro was a con job done by greedy exbankers etc to create debt to add strength to the Euro on the international markets…
The Rothchild grand agenda is finally coming to full fruition.
We shoulda stayed with the Pound lads.
When my alarm clock wakes me up in the morning it leads me deeper and deeper into the unknown.
.
“Events dear boy,events”.
I once had breakfast across the table from Mario Draghi in Switzerland. I’d have to say he seemed like minus craic.
He is showing his teeth in that photo???
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