Experts unanimously believe that the ECB will Types 1% but this will be the limit drops
| Date: May 4, 2009 | Source: Sources |
| Category: Economy | |
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Loading ... The Governing Council of the European Central Bank (ECB) decided a new reduction of a quarter point interest rates at its meeting next Thursday, which will increase the rate at record low 1%, marking the limit relief of the monetary policy of the institution headed by Jean Claude Trichet, according to experts consulted by Europa Press.
In this sense, the U.S. bank Citigroup believes that the ECB will end rate cuts at its meeting next Thursday at 1% and, from there, will perform a gradual easing through unconventional measures as interest rates are stable at least until the first quarter of 2010.
"Most of the Governing Council seems reluctant to reduce the main refinancing rate below 1%," analysts said the bank, which suggest that any new action to ease monetary tensions will take place through "measures unconventional. "
In this sense, Citi suggests that these measures will probably aim to expand their open market operations and perhaps to provide medium-term projections about interest rates, while not expected to mimic the issuing institution to the Federal Reserve or the Bank of England and acquire assets, at least in the next two months, since this tool would be used only if all else fails.
The same view is Bank of America , as forecast to cut a quarter point to be decided in May last will and notes that the deposit rate will be set to the current level of 0.25%, reducing the corridor on the marginal lending rate in an attempt not to discourage loan between private parties.
Also, Bank of America analysts expect the launch of a new refinancing operation to twelve months and the announcement of a series of unconventional measures to complement the ECB's monetary policy.
Meanwhile, Morgan Stanley joins forecasts and predicts that the rate cut is 25 basis points on Thursday and that interest rates will remain stable and at 1% for the remainder of 2009.
The unanimity of the experts regarding the expected cut a quarter point has been reinforced repeatedly by the president of the Bundesbank and a member of the governing council of the European Central Bank (ECB), Axel Weber, who reiterated that the European issuing institution still has "a small window of opportunity" to reduce interest rates from 1.25% if necessary, but warned that placing the funds rate in the eurozone to below 1% would imply a risk of causing a paralysis of Private interbank market.
"I am critical of a reduction in the main refinancing rate below 1% it would imply that the entities would hardly paid for lending and this carries the risk of causing the paralysis of private interbank market," said Weber, who noted that some rates too low would cause "additional distortions" in the markets for short-term financing.
