The pan-European Stoxx 600 index Investors are currently pricing a 10 basis-point cut in December next year. Based in New York, Watts writes about stocks, bonds, currencies and commodities, including oil. Copyright © 2020 MarketWatch, Inc. All rights reserved. The European Central Bank announced Thursday it will cut its deposit rate and make new monthly bond purchases in the billions among other steps to help boost the Eurozone economy. Microsoft may earn an Affiliate Commission if you purchase something through recommended links in this article. “The ECB is likely to combine the interest-rate cut with an increase in the allowances in order to reduce the burden for the banks.” Commerzbank also halved its growth forecast for Germany to … “Today’s decisions have anchored and enshrined the Draghi legacy in future ECB decisions. The ECB said it would begin buying 20 billion euros a month worth of securities beginning Nov. 1. Show full articles without "Continue Reading" button for {0} hours. Draghi said risks to the eurozone outlook had increased as a result of prolonged global trade disputes and concerns about the prolonged process involving the U.K. exit from the European Union. The ECB said it would offer a previous longer-term refinancing operation at a rate as cheap as minus 0.75% and conduct additional longer-term refinancing operations to … William Watts is MarketWatch’s senior markets writer. The European Central Bank delved deep into its tool box on Thursday, cutting its deposit interest rate further into negative territory, launching a new round of monthly bond purchases and taking other steps to stimulate a flagging eurozone economy. ECB: A rate cut still looks unlikely – UOB NEWS | Nov 02, 12:01 GMT | By Pablo Piovano. Still, there was a broad consensus in favor of the entire package. Our main task is to maintain price stability in the euro area and so preserve the purchasing power of the single currency. The ECB is hinting it may not cut rates and conceded that negative rates could be damaging to the economy (paywall), though they maintain their negative rate … Economists had been less certain whether the ECB would also move to relaunch its quantitative easing program at its September meeting, but policy makers did so. The spectre of easing from the ECB, either through rate cuts or a new bond-buying scheme, has already ignited a sharp rally in the bond market. The ECB hasn’t cut its official interest rates at all during the pandemic, and that’s not likely to change on Thursday. JUST WATCHED The ECB could also look at giving banks a bigger exemption from its negative deposit rate and may even expand its more conventional Asset Purchase Programme but an interest rate cut … The European Central Bank’s surprise tweaks to monetary policy amount to an effective interest-rate cut that puts banks on the frontline of the euro area economic recovery. Borrowing costs last week were the highest since 2016. Lee Sue Ann, Economist at UOB Group, reviewed the latest ECB … EURUSD, In a news conference following the decision, Draghi said stubbornly low inflation, which remains well below the ECB’s target of near but just below 2%, was the main driver for the decision. The ECB also made adjustments to its targeted long-term refinancing operations to further encourage lending and, in a bid to ease pressure on bank profitability from a lower deposit rate, announced it would introduce a tiered system that would exempt a chunk of excess reserves parked by banks with the ECB from the negative rate. Risks of a eurozone recession remained “small,” he said, but had increased since the ECB’s last meeting. Yields and bond prices move in opposite directions. The move pushed the rate to minus 0.5%. SPX, By Julia Horowitz, CNN Business. The move to start a new source of funding and lower the rate on long-term facilities designed to promote lending will probably ease the stress in Europe’s money markets. The ECB cut its deposit rate to a record low -0.5% from -0.4% and will restart bond purchases of 20 billion euros a month from November, it said in a statement. The grim outlook facing the euro area was starkly laid out Friday by the ECB, which forecast in a pre-release of its May Economic Bulletin that the region’s economy could contract by as much as 12% this year due to the lockdown measures implemented to contain the coronavirus pandemic. The bond-buying decision sent European bond yields sinking, dragging on U.S. Treasury yields. That in conjunction with a 10 or 20 bps rate cut may be the right way for Europe if the coronavirus really does dampen economic activity so much as to lead to a risk of recession and deflation. Deutsche Bank CEO: Another ECB rate cut will have damaging side effects. “You can still cut the rates you charge on loans to banks even if you can’t cut the rate you pay on deposits.”, When asked in March why the ECB didn’t cut the deposit rate, President Christine Lagarde said other tools were a more “efficient response.”. And banks, which have been hoarding cash, could then boost lending and ramp up their bond buying to use as collateral for more ECB funds. On 8 October 2008 the ECB announced that, starting from the operation to be …  up 0.5%, while the Dow Jones Industrial Average The European Central Bank on Thursday announced a sweeping round of stimulus for the eurozone that includes both a rate cut and a return to quantitative easing. The European Central Bank is turning on the stimulus taps again, pushing interest rates further into negative territory in order to support the region's flagging economy. Back in September, the ECB had still been optimistic on the fourth quarter but the recent lockdowns mean it now expects a contraction. ECB’s Lagarde says decision not to cut rates was ‘unanimous’ The European Central Bank decided Thursday not to cut interest rates, despite market expectations for … As a result, the ECB’s staff projections for 2021 were revised downwards but revised upwards for 2022. The euro initially jumped on Thursday after the European Central Bank (ECB) opted not to cut interest rates, but announced an emergency package of … The E.C.B. U.S. stocks pushed higher, with the S&P 500 In outgoing ECB President Mario Draghi’s next-to-last meeting, the central bank, as expected, delivered a 10 basis point cut to the deposit rate that banks pay to park excess reserves with it. And economists have warned that a point could come when easing rates hurts rather than encourages lending -- a point known as reversal rate. ECB’s Stealth Rate Cut Lures Banks to Fund Virus-Hit Economy. Before moving to New York, he reported for MarketWatch from Frankfurt, London and Washington, D.C. The ECB meeting on Thursday has just got a lot more interesting, with markets pricing in a high probability of a rate cut despite a previously widely held belief that it won’t come until September. The European Central Bank has hinted it could cut interest rates to tackle a slowdown in the eurozone economy. Previously, President Trump previously lashed out at the ECB for its dovishness. A full ECB rate cut is now priced in by futures markets for 2019 after Draghi showed his concerns about the persistently low inflation in the eurozone and the lingering risks to growth. The European Central Bank (ECB) is the central bank of the 19 European Union countries which have adopted the euro. The Federal Reserve is expected to cut interest rates in its meeting from July 30. Doubts had emerged in the runup to the meeting after a handful of ECB officials, in public remarks and media interviews, had questioned the need for relaunching asset purchases. He also writes about global macro issues and trading strategies. Draghi, in a news conference following the decision, said there had been broad support for the rate cut and an extension of the central bank’s forward guidance on rates, but acknowledged more “diversity” of views on relaunching bond purchases. The staff projections show GDP growth rates of -7.3%, 3.9%, 4.2% and 2.1% for the years 2020 to 2023. After cutting conventional interest rates for most of the past decade, the ECB’s decision is another sign officials see little room to lower these any further. The ECB signaled a rate cut in its monetary policy meeting. -0.77% Most economists in a Bloomberg survey conducted before this week’s meeting said they expect the ECB to add 500 billion euros to the program by September. On inflation they cut their projections for this year and 2022. The ECB’s challenge: Pushing rates further into negative territory without wrecking eurozone banks, Trump complains ECB rate cut will hurt U.S. and Mnuchin doesn’t disagree, Supreme Court declines to hear Texas case, ending Trump’s effort to overturn election, Frustrated Trump mulls appointing special counsel to probe election, Hunter Biden, Trump inclined to tap special counsel to probe election loss to Biden, Supreme Court has rejected Texas suit to overturn election results in Georgia, Michigan, Pennsylvania, Wisconsin, Here’s the case for Elon Musk, Warren Buffett and the rest of America’s billionaires sending $3,000 stimulus checks to everybody, Stock-market uncertainty runs high headed into Fed’s final meeting of 2020, Distress looms over U.S. commercial real estate in 2021, One result of the pandemic: More consumers are abandoning cash, America’s 1% will be pulling out all the stops to get their hands on COVID-19 vaccine. In line with that guidance, the bank kept interest rates unchanged at record lows, although it maintained a long-standing pledge to cut them further if necessary. is widely expected to cut the rate it charges banks to park money in its virtual vaults. SXXP, The Supreme Court decided on Friday not to hear a case filed by Texas that sought to have the results of the presidential elections in Pennsylvania, Georgia, Michigan and Wisconsin declared unconstitutional, and therefore effectively hand President Donald Trump a second term. “This is the brave new world of reversal-rate economics,” said Richard Barwell, an economist at BNP Paribas Asset Management. ECB Tested by Market Calls for Rate Cut That Will Erode Arsenal Paul Gordon 3/2/2020. But yields soon rebounded into positive territory as trade-deal hopes appeared to take center stage. It said a weak manufacturing sector and … On Thursday, he used the decision as an excuse to again bash the U.S. Federal Reserve via Twitter: Asked about the tweet, Draghi responded that ECB policy makers “do not target the exchange rate, period.”, Read:Trump complains ECB rate cut will hurt U.S. and Mnuchin doesn’t disagree. Among other steps taken by the ECB on Thursday, policy makers extended the so-called forward guidance on rates, saying they would remain at “present or lower levels” until the inflation outlook “robustly” converges with the bank’s target inflation rate of near but just below 2%. In outgoing ECB President Mario Draghi’s next-to-last meeting, the central bank, as expected, delivered a 10 basis point cut to the deposit rate … With long-term loan rates dropped to minus 1% and the rating on collateral in some cases down to BB, “the June TLTRO should be huge!”, (Adds ECB economic forecast in fourth paragraph), For more articles like this, please visit us at bloomberg.com, Like us on Facebook to see similar stories, Pfizer/BioNTech vaccine's 1st impact could be in April, COVID possibly under control 'by end of next summer', Jalen Ramsey Has Message For Everyone About Aaron Donald. That said, the tweak to TLTRO loans -- described by Robeco strategist Martin van Vliet as a “stealth rate cut” -- and the introduction of the pandemic emergency longer-term refinancing operations, are among the least controversial moves the ECB could make, according to Banque Pictet & Cie’s Frederik Ducrozet.  fell to a two-year low versus the U.S. dollar in the wake of the decision, but later rebounded following a round of U.S. economic data and after a news report said Trump administration officials were weighing an interim trade deal with China. The downside of veering from conventional tools is that it complicates monetary policy. (Bloomberg) -- The European Central Bank’s surprise tweaks to monetary policy amount to an effective interest-rate cut that puts banks on the frontline of the euro area economic recovery. Previously, the ECB said it intended rates to remain at present or lower levels through the first half of next year. 10 bp rate cut, QE of 30 billion euros per month, extension of forward guidance This month, U.S. DJIA, -0.55% and European stocks SXXP, +0.17% have both added about 2%. See: The ECB’s challenge: Pushing rates further into negative territory without wrecking eurozone banks. But right now, the “ECB is determined to focus on the bank channel and address any liquidity issues,” Christoph Rieger, head of fixed rate strategy at Commerzbank AG. Interest rates were cut … The ECB cut its forecast for growth in the 19-member single currency zone this year by 10 basis points to 1.1 per cent, and by 20 bps to 1.2 per cent for 2020. This follows months of pressure from President Donald Trump, who …  was up 0.2%. Almost every sovereign bond in the euro zone rallied on Thursday, as did three-month Euribor interest rate futures, which signaled the rate banks use to lend to each other will fall further. The euro Read More: Euro Area’s Record Slump Adds Urgency to Fiscal Aid Calls, “It’s a very important decision,” Peter Praet, the ECB’s former chief economist, said in an interview with told Bloomberg TV’s Francine Lacqua on Friday. The decision marks another push by policy makers to help the economy through the worst shock in decades by stabilizing bond markets and making sure enough cash is finding its way to companies struggling to stay afloat. Moreover, economists were describing the ECB’s asset-buying plan as “open-ended” QE, with policy makers pledging to continue purchases “as long as necessary to reinforce the accommodative impact of its policy rates” and to end shortly before the ECB begins to raise key interest rates. DJIA, -0.13% “It shows there is action from the central bank to try to stimulate the lending offer from the banking sector.”. All 33 economists surveyed predict the deposit rate will remain at -0.5%. Updated 12:36 PM ET, Wed September 4, 2019 . BNP Paribas’s Barwell suggests that if the ECB decides to keep altering rates on targeted loans known as TLTROs, then the minimum rate should identified as a benchmark. The decision drew the attention of U.S. President Donald Trump, who has previously accused the ECB of working to undercut the dollar. +0.16% ‘Whatever it takes’ has just been extended by ‘as long as it takes,’ said Carsten Brzeski, chief economist at ING Germany, referring to Draghi’s famous 2012 pronouncement at the height of the eurozone debt crisis that the ECB would do “whatever it takes” to preserve the euro. 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