Thursday, June 5, 2014

Meanwhile ECB President is expected to cut rates and introduce measures to head off deflation

Bank of England holds UK interest rates at 0.5%

UK interest rates have been held at the record low of 0.5% for another month by the Bank of England. The size of the Bank's bond-buying economic stimulus programme was also kept unchanged at £375bn. The decision was widely expected, despite continued signs of strength in the UK economy. Last month, the Bank of England reiterated it was in no rush to raise rates, with governor Mark Carney saying they may remain low "for some time". However, Mr Carney added the economy had "edged closer" to the point where interest rates would need to rise.

Posted by jack c @ 12:27 PM (4628 views)
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13 thoughts on “Meanwhile ECB President is expected to cut rates and introduce measures to head off deflation

  • mountain goat says:
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  • ECB have moved to 0.15% so we are not quite in negative territory yet !

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  • Low interest rates definitely limit the amount of money coming into an economy, as all those with savings are losing money. So folks cut back more and save even harder.

    Low interest rates make deflation even more likely. Though, low interest rates are mainly about keeping government debt and spending low.

    Turning Japanese anyone?

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  • ECB have moved to 0.15% so we are not quite in negative territory yet !

    [ECB] has also reduced its deposit rate below zero, to -0.1%, which means commercial banks will have to pay to lodge their money with the central bank, rather than receive interest.

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  • HPW agreed

    The European Central Bank has cut benchmark interest rates to a new historic low of 0.15% as it acts to stimulate economic growth and stave off another downturn. In a series of moves, it has also cut the deposit rate from zero to -0.1%, effectively meaning it will now cost banks interest to deposit money with the ECB. The rate on the marginal lending facility will be decreased by 35bps to 0.40%
    Speculation the bank would act in June was fuelled after ECB president Mario Draghi said last month it was “comfortable” with the idea of cutting rates after becoming alarmed at the strength of the euro.
    The currency, which hit a two-and-a-half-year high against the dollar last month, had become an increasing source of frustration for export-led businesses. Philips, Adidas, Michelin, cement-maker Lafarge, and Airbus have all pointed to the strong euro as the main contributor to poor results in recent months.
    Since Draghi’s comments, the currency has since fallen to a four-month low of $1.3606 this morning, after nearing the symbolic $1.40 figure in mid-May.
    The currency saw further losses following today’s rate cut, trading at $1.356.
    More to follow

    Source http://www.investmentweek.co.uk/

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  • It’s not a strong currency leading to poor exports, it’s low global demand caused by excessive debt bringing forward tomorrows consumption.

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  • Yes, jack c.

    One thing is clear, they are running out of options…..and fast.

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  • HPW – not in the UK where creative thinking by Mr Osborne & Co will soon have the Bank of England buying property just like they have been buying Bonds ! – you heard it here first (lol)

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  • HPW – not in the UK where creative thinking by Mr Osborne & Co will soon have the Bank of England buying property just like they have been buying Bonds ! – you heard it here first (lol)

    Ah, but they have already started doing that, with HTB; where the govt takes a share in any future price rises.

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  • HPW – that’s the convoluted version, just wait until the BOE start buying at auction just like in the Gilt market (lol)

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  • “just wait until the BOE start buying at auction”.

    Sounds like a good conspiracy theory to me.

    However, I thought the ECB idea was to “encourage the people to buy, and not to save”. The spin off would be tax revenue (VAT) and employment for salesfolk.

    My question… If everyone is so busy borrowing from the banks, what happens when a number of them decide they can’t/won’t repay.

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  • Big news here is that European Central Bank cuts deposit rate to -0.1% plus 400bn of funding. Now, the funding is an attempt at stopping rates falling below -0.1% because it does the same thing. QE looks like a confidence game, whereas negative rates look like despiration.

    I am expecting yet more folk to plough Euros into London as a result of this because capital flees where currencies are debased.

    Again, how can BOE raise rates under this deluge?

    Expect capital controls and to do that we will have to start severing ties with the EU. Economics will do what UKIP is incapable of doing just as economics broke the Exchange Rate Mechanism, only this time, Sterling is going up rather than down. And in the end, all efforts will be futile, because national governments are no longer capable of truly controlling international money flows.

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  • Draghi is a FOOL. He is concerned about the strength of the Euro. Actually, it is merely re-gaining lost strength since the crisis. A stronger currency and reasonable interest rates are a sign of health, and if Draghi wanted to boost economics, let the currency become stronger and focus on trade within Europe, between Europeans. Wasn’t that what the Eurozone was for after all? No, now we hear that we have to export to other countries to be wealthy. But we already have almost half a billion consumers here, so why will it benefit us having lower wages and lower value savings and assets? This really is an example of the insane running the asylum. These Marxists have no faith or trust in any market forces and believe their ego bigger than the collective choices of billions of consumers. Idiot.

    The end result will be lower consumer spending, reduced investment, both local and incoming. This monetarist policy is a failure.

    The true solution to demand side economics is SLASH TAXES AND RED TAPE you moron.

    But these Marxists cannot bring themselves to do that, because the sun shines from their asses.

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