ECB buys back bonds

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The turnaround in interest rates is distant. Because of the weaker economy in the Eurozone, the European Central Bank relaxes its monetary policy. She buys back bonds, and aggravated the penalty interest rate for deposits.

From November the European Central Bank (ECB) begins with the purchase of bonds. As the Central Bank announced on Thursday in your meeting, you will buy for the time being 20 billion euros per month bonds from Euro countries and companies. An end date was not called.

Thus, the ECB takes the purchase program again, which she had finished only in December 2018. To weddings, had you bought every month for 60 billion euros in bonds, in total it has spent 2.6 trillion Euro.

With this renewed monetary policy easing, the Central Bank is braced against the economic downturn. Economic researchers see Germany and other Euro countries on the brink of a recession.

Penalty interest for money Parker

In addition, intensified, the ECB, the punitive interest rates on deposits of commercial banks from -0.4 percent to -0.5 percent. Most market participants had expected. A minus sign in the Deposit rate means that the institutions of criminal will have to pay interest, if you are Parking excess cash at the ECB. The set is already for 2014 negative.

The key interest rate to supply the commercial banks with money, the ECB kept, however, at 0.0 percent. Already in March 2016 he is on this record low.

No turnaround in sight

The ECB also adjusted its Outlook. Now they want to keep their key interest rates at present or lower levels until the inflation target of just under two per cent is reached. So far, they turned up in mid-2020 stable or lower key rates in view. The ECB last raised in 2011 their interest rates.

The ECB also decided the terms and conditions of your planned to make new, long-term loans for banks, something advantageous, and to extend the maturity of these loans from two to three years.

Parallel to the tightening of the penalty interest for banks, the ECB also announced a staggering. This will no longer be levied on all the Central Bank money parked penalty interest.

With two measures of graduation and the long-term loans wants to provide the ECB to the commercial banks a bit more leeway, because the complaints since the beginning of the low interest rates on dwindling margins.

Second-to-last appearance: Mario Draghi at the press conference after the ECB rate decision

Euro under pressure

The Euro fell after the decision on 1,0925 Dollar and approached the 28-month Low, the he at the beginning of the month had reached. Also, the yields of the government bonds. The rate of interest on 30-year German Bund slid back negative, the yield on ten-year Italian securities fell to a record low of 0,758 percent.

“So Draghi may be the thanks to the Italians, of course,” said Thomas Altmann, portfolio Manager at the asset management QC partner. “At the same time, the hostility will go out of Germany. Today, interest is now turning up in more and more remote. Interest rates remain abolished.”

The joy of investors about the season of interest on Bank deposits at the ECB, lasted only a few minutes: the Index for the banks in the Euro zone declined by almost one percent, the shares of Deutsche Bank were at a discount of 1.5 per cent tail light in the Dax.

The penal interest on Central Bank deposits are virtually a tax, says Artur Baluszynski, chief Analyst of the investment Manager, Henderson Rowe. You might be a burden for the ailing European economy. Unclear stay also, whether the measures taken by the ECB were not sufficient to get growth and Inflation to gain momentum, said Carsten Brzeski, chief economist at ING Bank. “The elephant in the room, the budget policy is. It is clear that without the support of this side of Draghi’s statements trick necessarily a happy end.”

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Skepticism among experts

Clemens Fuest, President of the Munich-based Ifo Institute, is skeptical that the ECB’s expansionary monetary policy can lame help the economy in the Euro area on the jumps: “in view of the deterioration of the economy and the decline in inflation expectations, the ECB’s decision is certainly defensible. At the same time, it is clear that monetary policy has its limits, and growth impulses from other areas of policy, especially economic policy reforms and better conditions for private and public investment, need to come.”

Sebastian Wanke, an Economist at the KfW Bank, shares this scepticism: “It is the penultimate decision of Mario Draghi as ECB President and his last great success. This is about as how of the financial market participants expected. However, only the least likely to believe that such measures economic activity and Inflation can appreciably stimulate.”

Return of the “Big Bertha”

Alexander Krüger, chief economist, feared at the düsseldorf Bankhaus lamp, that the pressure of the financial markets and the policy on the ECB will continue to rise: “The financial markets, and the ECB provides. She has ausgemottet the big Bertha today, the package of measures is very comprehensive.”

Nevertheless, the approach of the ECB could not convince. “It is no good temper, neither by the global trade disputes, outgoing economic damage to the structure due to increase low rates of inflation.” Was likely, therefore, that the policy of cheap money will continue for years, says Krüger. “The ECB will always have new things to think of, to please governments and state budgets. The harmful side effects of monetary policy are even greater.”

bea/tko (dpa, reuters, afp)