Tag Archives: European Central Bank

Are ECB’s Greek bond purchases really irrelevant for the private sector?

Motivated by the current discussions about the Greek debt problems, Paul De Grauwe and Yuemei Ji have a VoxEu column addressing “Why the ECB should not insist on repayment of its Greek bonds”. In a debate that currently is, and has been for a long while, marred by political idiosyncrasies and ethnic stereotypes of the worst kind, it is a sound and healthy contribution based on basic public accounting. In all fairness, however, the authors cannot help contributing to the nationalistic platitude by making snide remarks about “hard-working German tax payers”. Also, in an earlier VoxEu column on the same subject they almost question the intellectual sanity of German economics … Continue reading

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No Negative Rates in Euroland (yet)

Today, the ECB decided not to continue their decrease in interest rates implemented on May 8. All rates remained unchanged, so no new territory was explored. In particular, deposit rates remain at zero, so no negative rates were implemented. Apparently the 0.25 basis point cut on main refinancing operations in May was considered sufficient. It just seem a bit “to little to late” in the current situation, when the ECB simultaneously revised output projections downwards, and stressed that the risks are on the downside. Draghi emphasized at today’s press conference that no measure was set aside permanently, thereby signaling that a further cut cannot be ruled out. He also did … Continue reading

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Happy 2013

Hi. I haven’t been too active lately here. Been busy doing proper academic work like teaching and research. I may become more active next year, but I will stick to my principle that one doesn’t have to have an opinion, and vent it, about everything. Actually, the day where the news on TV announce that they cut their program short by 15 minutes due to lack of interesting news, or when a newspaper come in a short, cheaper edition during summer due to lack of important stuff to write about, then I will be happy. Too many just write because they want to write, or have an obligation to write. … Continue reading

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The ECB in Slovenia: Transparency about what?

The meeting of the ECB’s Governing Council was last Thursday hosted by Slovenia, but the procedures were the usual. Compared to last month’s meeting, however, where everything was about fiscal policy, the very first question at the press conference actually dealt with monetary policy. Triggered by the (expected by most) decision to keep policy rates unchanged, a reporter asked: Two short questions, Mr Draghi. The first one: you mentioned downside risks to the economy again. Have there been any discussions today about a possible rate cut in the months to come? And the second one on Spain: do you find Spanish bond yields appropriate at the moment or are they … Continue reading

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From SMP to OMT: ECB commits to destroy monetary transmission

This is not a humorous title, and this is not a funny post. A couple of days ago, the ECB announced after its Governing Council meeting that it would initiate a new program of sovereign debt purchases. The program is named Outright Monetary Transactions, which adds OMT to the endless list of acronyms that has emerged after the onset of the financial crisis. The program replaces the Securities Markets Programme (SMP), or, rather, extends it in a number of directions. As mentioned in my post on the last ECB policy meeting, its need for emphasizing that what it does is not illegal strikes me as odd if not suspicious. At … Continue reading

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May in August at the ECB

After the recent meeting at the ECB’s Governing Council, it was decided to keep the policy rate fixed at its record-low level of 0.75%. As the (bleak) economic outlook has not changed markedly since the last meeting, it seems a sensible decision given the ECB’s mandate. Many, however, forget that the mandate of the ECB is to secure stable prices in the Euro area, which by the ECB is defined as a HICP inflation rate close to, but not above, 2%. It is currently at 2.4%, so it is difficult to accuse the ECB for being particularly hawkish. But the policy rate setting, and how it was aligned with the … Continue reading

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A week of records in Euroland, Denmark and Wimbledon

Last week saw the ECB lower its policy rate to the lowest level in its history. A meager 0,75 % is the rate on main financing operations. Not much, not surprising, and probably not what will make much of a difference for the dire straits of the European economies. The rate cut was the impetus for a record in Denmark as well in last week. Apart from Frederik Løchte Nielsen’s unbelievable feat of becoming the first ever Danish Wimbledon champion (in doubles with English Jonathan Marray), the central bank of Denmark also cut rates thereby introducing a negative deposit rate (for 7-day deposits) for the first time in history. Denmark … Continue reading

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Draghi cuts and markets flip

Last week marked the second time where new President of the European Central Bank, Mario Draghi, governed an interest-rate decision for the Euro area. And for the second time it was and interest rate cut, implying an interest rate on main refinancing operations of 1.00% effective from 14 December. This ties the lowest level in Euro history, which was effective from 13 May 2009 to 13 April 2011. So, loosely speaking the interest rate is back at the financial crisis level. The decision makes sense given the economic outlook for the Euro area: A continuation of high unemployment and absence of inflationary pressures. It was, however, not a unanimous decision. … Continue reading

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