At Thursday’s meeting, the ECB decided on interest rates. He left them unchanged, as expected. It attracted more attention to what they say, the bank’s president Mario Draghi. At his words, the market reacted to declines in the euro exchange rate. Can enjoy, those who took out a loan in foreign currency. Also Frankowicz.
Update 15:30
The main deposit rate, or refinancing, left at 0.05 per cent., the deposit rate was maintained below zero at -0.3 per cent., and the lombard rate at 0.3 percent.
What does this mean for borrowers who have debt in in the euro? First of all, they have not increased interest rates on their loans. The second issue – the euro exchange rate against the dollar is falling 0.6 percent. and he began to fall rapidly after the start of the press conference ECB President, Mario Draghi.
The euro strengthened even gold by 0.3 percent. to 4.48 zł, although during the day for a while went out over the psychological level of 4.50 zł per euro. Gold also improved relative to the franc by 0.3 percent. Draghi’s words have given so tangible profits Polish borrowers. Their payments will be slightly lower.
The refinancing rate is financing the activities of commercial banks in an emergency liquidity and gives most of the liquidity in the banking market, so this is a key indicator for the banking sector. Indirectly decides on interest rates on loans in euros.
In contrast, the deposit rate determines the interest rate on overnight deposits made by commercial banks at the central bank. Negative – discourages banks to “park” money and compels them to do so or allocate them to the lending or invested. Therefore, the exchange of shares they like lowering of this rate, he encourages bankers to take more risk and a portion of capital goes just to the stock exchange.
– the ECB has taken key decisions at its December meeting, and since then the situation in the euro area dramatically not worse – indicates Marek Rogalski, chief currency analyst DM BOS. – However, a lot has changed in the external environment.
Such factors mentioned just Draghi during a press conference.
– The turmoil in the financial markets and concerns about China and other emerging markets will induce the ECB to revise its policy monetary – said Draghi. He declared at the same time, it will stick to the prospect of further quantitative easing. – Interest rates remain at current or lower levels for a long time – said Draghi. – We begin the new year once again increase risk levels, increased uncertainty about the growth prospects of emerging market economies, in respect of liquidity in the markets of financial and commodity and regarding geopolitical risks.
– Be sure so we need to review and consider changes in our attitude to politics monetary at our next meeting in March – said, thus a sign that the bank will move earlier than anyone anticipated.
Most analysts had expected another cut of 0.1 percentage point deposit rate, but not earlier than during the meeting in June.
The central bank does not seem so worry about inflation. It is true yet not fully revealed in Europe, but the latest index of consumer prices (for December) was 0.1 percentage points higher than expected. So far, that oil prices remained deflation, now you can see that other commodities are starting to get more expensive and outweigh the scales.
The ECB prints new 60 billion a month to support the economy and a possible acceleration in price growth may pose a threat. Too much money supply may eventually spill on the market and turn into hyperinflation.
On Thursday, the message from the ECB also focused attention on regulations regarding loans in the European banking system. It was in the last few days quite zaciążyło courses of banks, especially in Italy and Portugal. The regulations could force the creation of larger reserves for bad loans.
However, Draghi reassured investors. – So far we see that banks are quite “resilient” – said Draghi. – We have not seen so far any potential instability in the sector, in contrast to what was observed during the pre-crisis – he added.
European stock exchanges reacted to those words increases in share prices.
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