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Mario's ECB lightning bolt - it's a rate cut!

Thursday, Nov 07, 2013 - 04:19

Nov. 7 - The ECB springs a surprise 25 basis points rate cut, sending a message that it it takes deflation risks serious. We analyse Mario Draghi's news conference with Berenberg Bank's Holger Schmieding.

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The European Central Bank takes -- market all gone passing interest rates to a new record today. Not a -- he says it wasn't to shock the market nor have the bank run out of options. Joining me now is hold this meeting chief economist at -- back hold think he's much for joining us strong stuff from the ECB today. Citizens today do you think. You know I don't thing it's too little too late the you're the only. Economy isn't recovering anyway so in that sense the Euro was on the right track even before two days actually. What's today's action means is that the risk all and excessively expensive you roll over you who -- -- Dampening the recovery too much that that risk has now receded. The ECB hasn't gone against the risk of a strong Euro. And tens of deflation in the about what. Is more compelling behind this made what did she bring the you're down or was it to head off the threat of well that's roughly the same thing. The Euro -- has extremely -- inflation the ECB wanted to react to that. But the rate cut itself will not stimulate credit growth very much in the eurozone we need to get first possibly the banks' stress tests. Before we can expect a lot of credit growth. And it says to do something about the inflation outlook and the growth outlook the ECB -- And has chooses something that would work through the exchange rate who robbed them through credit creation. Do you miss banks well constant stress tests. Well it most of them will probably not or we see about that. Hopefully we get behind these things comparatively cost. And I'm fairly confident that once we had a rough a veteran idea of the stress test saved by the middle of next CEO of first rough result it's. Then credit creation for the old sue -- -- the strongly in the Euro -- to get the economy when the ball solid footing. Now hold a mini mock it's like taking all gone by by this move today by the ECB. Do you think it suggests that -- perhaps John he has failed to successfully communicate the sport guidance. Well -- hope it is not how it's just a few days of scale that we got of this surprising inflation number. The ECB hasn't had much opportunity to actually -- does to some things. In the mean time. Drug pointed out correctly the situation has changed with the low inflation number and the ECB react to that. And -- -- the market's surprise was and the surprise for me was that the ECB to -- to date Robin for weeks late but in the big scheme of things. Afoot in the timing before weeks. Is not such a big surprise. As treating your next time you said there was suggestion that they could be yet another rate cut. So when this rate cut -- When I don't think that would be another rate cut I do things yet he caught me with strength and read it on its own without needing further rate cut. But of course it's something unexpected were to happen in the Euro zone then the ECB would react party. Pretty much immediately. So there is no new timing -- rate cut this distance the suggested it really needed the ECB could again react fox right right and -- all the -- he has used blunt instruments like for example interest rates. The chipping in looking at more subtle. You know it may -- as a -- of these measures -- Well I don't think there is very much the ECB could use in terms of -- measures festival they have or do you look at all the soccer matches in the last 78 months. And they haven't found much they could do about the save the credit crunch in pots of the Italian economy. And on top of that the use of non standard matters would probably be much more controversial. With Bundesbank resistance then the use of -- standard measure the interest rates. So I think this is probably it from the ECB but hopes before the mattress would be kept alive by drug a full quite the white. Right we have to David and my thanks to hold this meeting from baron bag that I'm averaging a long and this is choices.

Mario's ECB lightning bolt - it's a rate cut!

Thursday, Nov 07, 2013 - 04:19

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