The ECB Opens Up Three Negative Measures To Save The Economy

P, the European Central Bank will become the first central bank to implement negative interest rate policy in the world.

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< p > yesterday evening, the European Central Bank announced the interest rate decision in June, reducing the main refinancing interest rate by 10 basis points to 0.15%, with a previous value of 0.25%.

At the same time, it lowered the marginal lending rate to 0.40%, and lowered the overnight deposit interest rate to -0.10%.

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Not only that, P Mario Draghi, the European central bank governor, released the "blockbuster" at the subsequent press conference, which will terminate the stock market plan (SMP) write off operation, prepare for the implementation of quantitative easing (QE) and launch a new round of long-term refinancing plan (LTRO). Mario Delagi Draghi

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< p > for this purpose, the people's livelihood macro pointed out in its research report that the European Central Bank's scheduled a href= "http://www.91se91.com/news/index_c.asp" > interest rate cut < /a > 0.15%, while interest rate cuts only started, the second half or the European version of QE, hedge deflation risk and LTRO expiration pressure.

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< p > < strong > first recruit: < a href= "http://www.91se91.com/news/index_c.asp" > negative interest rate < /a > < /strong > /p >

Below P, the ECB lowered the overnight deposit interest rate to a negative value. Banks will need to pay for the overnight deposit of the central bank, which will also increase the operating cost of banks.

Therefore, it will stimulate banks to put more capital into the market instead of depositing the central bank, thereby increasing the money supply and promoting the currency depreciation and deflation expectations.

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< p > earlier, the German central bank governor Wiedemann (Jens Weidmann) had thought that the implementation of negative interest rates would cause damage to the interests of depositors.

At the same time, the lessons of Denmark are still in sight. They have implemented negative interest rates in order to promote economic recovery.

Although it did promote bank lending in the short run, it also led to the rise in operating costs of Danish commercial banks, and commercial banks began to look for ways to pass costs, which eventually led to the credit crunch of Danish commercial banks.

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< p > "negative deposit interest rates may also strengthen the euro counter intuitively rather than lower the euro. If this policy encourages investors to invest in peripheral countries, it will push up the yield differential."

"This will attract capital flows out of the euro zone, and may hit the euro's target," said Mark Wall, an economist at Deutsche Bank, Mark Wall.

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Delagi P said, "the interest rate of the European Central Bank is actually in a lower category. We must be especially vigilant against negative interest rates. We may still adjust interest rates.

It is extremely wrong to say that we want to exploit depositors. The interest rate changes of the ECB are aimed at banks, not people.

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< p > < strong > second strokes: < a href= "http://www.91se91.com/news/index_c.asp" > QE < /a > will be launched < /strong > /p >

Delagi P mentioned that QE has long been an old story. In the first ECB forum, he said: "if inflation expectations are going downwards, we will adopt more expansive measures, that is, a broad-based asset purchase plan."

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Last night, Delagi said again: "the European Central Bank is considering the feasible and unconventional monetary policy. Large-scale asset purchase is one of the unconventional measures we can use." P

We are preparing QE, and if necessary, the European Central Bank will act quickly. "

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< p > since the action is taken soon, what choice does the European Central Bank have on the iron plate? < /p >

< p > the first financial and Economic Research Institute pointed out that the European version of QE includes two main categories, namely, the purchase of private sector bonds and the purchase of sovereign debt.

One is to buy private sector assets, including ABS, asset-backed securities and advanced unsecured debt.

The purchase of private sector assets will probably increase the liquidity of 300 billion euros.

The European Central Bank's purchase of ABS will narrow the spread of corporate debt and German corporate debt in the peripheral countries, such as Portugal and Spain, thereby providing a more diversified primary market and pushing up inflation expectations.

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< p > two is the purchase of sovereign debt, the total amount of 1 trillion euros, of which the first round of 500 billion euros, accounting for about 7% of the euro area's total debt, which can increase the liquidity of 500 billion euros, and can promote the depreciation of the euro, at the same time, it can push up the inflation rate expectations.

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< p > historical statistics show that the purchase of 500 billion euro bonds will increase the breakeven inflation rate for 2~5 years by 50~100 basis points, and the 10 year breakeven inflation rate will rise by 25~50 basis points.

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< p > however, JP Morgan said that if the European central bank implemented QE, it would increase the market liquidity rather than release the pressure of being short.

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< p > < strong > the third move: supporting measures < /strong > < /p >

< p > besides negative interest rates and QE, Delagi also mentioned a series of other measures, including LTRO, ABS (asset backed securities) and termination of the SMP write off plan. He also made some requests for these measures in the past.

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P, the so-called LTRO, is the European bank's mortgage loan to the European Central Bank with the required collateral, with a minimum loan of 1 million euros and an interest rate of 1%. The aim is to increase interbank liquidity and maintain financial stability in the European banking sector.

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Prior to the P, the European Central Bank has launched two rounds of three year LTRO to stimulate loans to promote the development of small and medium-sized enterprises. However, contrary to expectations, some of the funds released through LTRO have been partially returned to the banks, and some of them have entered the Treasury market to carry out arbitrage operations, contrary to Yuan Jingxiang.

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< p > Delagi said: "the central bank will implement a new round of LTRO with a scale of 400 billion euros, and a new round of LTRO expires in 2018.

Public sector loans will not be included, and banks will be able to lend 7% of total loans to the euro area.

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< p > for ABS, Delagi said: "the ABS project category has not yet been discussed, and the ABS project should be related to the economy of the non-financial sector.

We must re-examine the regulation of ABS to eliminate excessive discrimination against these products.

Only when ABS purchases become pparent and real will people put aside their prejudices against this measure. "

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< p > SMP plan, that is, the European Central Bank will buy treasury bonds of Member States through the two tier market, so as to intervene in the bond market, push up its demand for treasury bonds and reduce the yield.

At the same time, it can expand the balance sheet of the central bank to provide liquidity for them, so as to ensure the stability of the bond yields of the crisis countries in the two level market and thus stabilize market confidence.

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In September 2012 P, the European Central Bank has terminated SMP, but continues to hold all the Treasury bonds it purchased before. It also gets deposits equivalent to SMP scale from banks every Tuesday to hedge against the impact of this purchase and respond to possible inflation risks.

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