Posts Tagged ‘ 25 basis points ’

ECB Cuts Rates 25 Basis Points to 1% – Hawkish Press Conference Q&A Squashes Hopes of Sovereign Debt Purchases in Larger Amounts

December 8, 2011
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ECB Cuts Rates 25 Basis Points to 1% – Hawkish Press Conference Q&A Squashes Hopes of Sovereign Debt Purchases in Larger Amounts

The ECB issued a terse press release detailing an interest rate cut for the main refinancing operations of the Eurosystem (from 1.25% to 1.0%) commencing on December 14th. In addition, the ECB cut rates on the marginal lending facility and deposit facility by 25 basis points. This move was widely expected and had a limited impact on the euro or equity markets. The press conference and Q&A (45 minutes later) with financial reporters was where the real action took place. The only market friendly outcome was the announcement to extend lending to European banks from a one-year to a three-year term. The collateral requirements for these loans are also being loosened. The press conference was predominantly hawkish. When asked about hints earlier in the week that the ECB could...

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ECB Cuts Rates 25 basis points – Dovish Comments From Draghi

November 3, 2011
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ECB Cuts Rates 25 basis points – Dovish Comments From Draghi

The ECB cut interest rates by 25 bps down to 1.25%. This was somewhat of a surprise cut as many expected Draghi to start his tenor by demonstrating some hawkish resolve – consistent with the views of departing ECB President Jean-Claude Trichet. Draghi presents a viewpoint that inflation is expected to fall further while highlighting that monetary growth is only moderate. He appropriately downgrades the forecast for Eurozone GDP growth and points out the “intensified downside” risks to the Eurozone economy. He goes on to point out that inflation is likely to fall below 2% in 2012. These are important comments because they immediately reveal that Draghi has a more dovish inclination relative to his predecessor. The ECB has more room to cut rates and the comments regarding the...

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