BOSSA.CZ (BOSSA.CZ)
Macroeconomics  |  January 10, 2013 11:20:37

What we can expect from the meeting of the ECB?


iPoint.cz The European Central Bank (ECB) today published a decision on the interest rate. Is expected to continue to maintain rates at a record low 0.75 percent. Politicians do not want to intervene in a slowly diverging European economy that is starting to show signs of stabilization.

ECB rate cuts could be also due to wait while approved but still nezpuštěného bond purchase program problematic countries. He starts working as soon as a country formally applies for financial aid and thus enter into the rescue program. This would lead to further pouring money into the eurozone.In addition, the ECB chief has repeatedly said that the central bank has done enough and now they are in a number of countries with fiscal consolidation.

Although the euro area is still in recession, but the latest data show that we are on the right path out of this. If the eurozone's biggest economy - Germany - lose my breath, is probably the reason for the ECB to intervene further. ECB President Mario Draghi could today at a press conference at 14:30 to talk in a more positive tone.

"Interest rates will remain unchanged almost certainly, none of the last message was so important for the ECB to consider a reduction," said Gilles Moec economist at Deutsche Bank. ECB should now choose more moderate policy and seek to promote trade area.The bank could then build on the results of the purchasing managers index (PMI), according to which the eurozone's worst is behind them. At the December meeting of the ECB, although discussed further lowering interest rates, but most of the members of the Executive Board refused.

More interest rate cuts likely would open the question of what will happen with the deposit rate, which remains at zero. If there would be a reduction in this rate, we would find ourselves in a negative value for the first time could be a charge for deposits. Mario Draghi, although he admitted that the bank is ready for this step, but none of them really count. Negative deposit rate would be dealt a further blow money funds that find themselves without sufficient cash from June 2012, when the ECB cut rates to zero.

Although the ECB forecast released last month, in which expected inflation 1.4 percent in 2014, which would justify further rate cuts, but even that decision is unlikely. The ECB also expects inflation already this year falls below 2 percent, a faster decline than originally ECB wanted.

At today's press conference, perhaps we will see clear answers. Most likely there will be no reduction in interest rates, but President Draghi will have to answer questions about the fate of the euro zone, especially what with the banking sector, which has problems with disinterest loans. Last week, the ECB published a report on the annual decline in loans to the private sector by 0.8 percent.

Eurodollars patiently waiting on the move to the side. It will be interesting to see if today will build on sale last week and again we will see the value of 1.3000. Markets in promulgating such important messages often move irrationally and can change the short term trend. The development of the Eurodollar now be decided in the U.S., where it will be published on the number of new applications for unemployment benefits.

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