The ECB kept its key rate unchanged
The European Central Bank keeps its cool. Faced with signs of recession in the eurozone and while a leading European bank, Dexia, is faltering, the ECB has decided not to ease monetary policy. It has left its main interest rate unchanged at 1.50%. A level considered "low" by the Board of Governors of the Central Bank.
At its last monthly press conference as president of the monetary institution, Jean-Claude Trichet said the ECB expects inflation "clearly above 2% in the coming months," before descending. One way to tell between the lines that interest rates are unlikely to be lowered over the next two months. Inflation in the euro zone peaked at 3% in September, a point above the objective of the ECB.
Still, the market calls for a rate cut."It reflects a lower rate of 0.5", observe the economists Societe Generale. Waiting judged "crazy" in the short term by the Luxembourg member of the Governing Council of the ECB, Yves Mersch.
The case for a rate cut was not, however, rule out of hand. For if the decision was consensus among the governors of the institution, the discussions were long, admitted Jean-Claude Trichet: "There was a discusion about the pros and cons of a rate cut or a maintenance of rates. After this long discussion, which was, I would say, as thorough and comprehensive as possible, we decided by consensus to maintain the rates. "
Some analysts point to a worrying season looming disaster on the front of the activity in the eurozone."The risks to growth, was talking about last month the President of the European Central Bank Jean-Claude Trichet, materialize," are economists at BNP Paribas CIB. In addition, "forecast the ECB behind sluggish growth at year end," they add online pay day loans.
Semi-surprise
The inaction of the ECB, however, is only half surprised. Jean-Claude Trichet, whose every word, in its public statements, is weighed, has not hinted in September that the ECB cut rates. Moreover, "the guardian of the euro zone will wait to act to have more evidence that inflation and growth will slow," noted economist of Nomura.
Observers expect more on a rate cut later this year. "Jean-Claude Trichet is expected to set the stage Thursday in a future rate cut in the next three months," analysts at Nomura advance.
Measures for banks
Taking note of the tense situation of European banks, the ECB launched a series of measures. It provides two refinancing operations unlimited volume of about a year in October and December. This exceptional instrument had not been asked since December 2009.
Jean-Claude Trichet also announced a relaunch of the repurchase program bonds. This will cover 40 billion euros between November 2011 and October 2012. The "bonds" are essentially backed securities real estate, and essential to the survival of many specialized banks in Europe. The purpose of all these operations is "to ensure that banks in the euro area are not limited in regard to liquidity," said French.
The ECB has also called for a recapitalization of institutions in the euro area. They must "do whatever is necessary to strengthen their balance sheets," pleaded Jean-Claude Trichet, using it for their profits, or paying wages "moderate".
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