7 Nov 2013
Flash: Respect for the Draghi regime – Societe Generale
FXstreet.com (London) - Kit Juckes, Head of Global Currency Strategy at Societe Generale, noted that the The ECB cut the Refi rate by 25bp to 0.25%, the marginal lending facility rate by 25bp to 0.75% and left the deposit rate at 0 and he commented.
Key Quotes:
“As far as policies to revive nominal growth in Europe are concerned, I stand by a view that the ECB simply doesn't have the armoury that is available to the Fed”.
“I would prefer to see the ECB buying a lot of government debt than see LTROs encourage banks to buy government bonds, some of which can happen at the expense of private sector loan growth. Without more credit growth the Euro area will continue to stagnate, especially given the degree of fiscal austerity that is still required by the rules the system lives by”.
“And that is why I think we will see more easing, within the limits of what the ECB can do - starting with another LTRO next year. But I would still describe this as a pea-shooter policy because it would take ECB government bond-buying to constitute 'bazooka'.”
“Still, I have a huge amount of respect for the Draghi regime at the ECB, which started with a surprise rate cut, moved on to the LTRO, shocked us with the 'anything it takes' comment and continues to surprise. He is incredibly imaginative and innovative, even if he is isn't armed with big enough weapons....”.
Key Quotes:
“As far as policies to revive nominal growth in Europe are concerned, I stand by a view that the ECB simply doesn't have the armoury that is available to the Fed”.
“I would prefer to see the ECB buying a lot of government debt than see LTROs encourage banks to buy government bonds, some of which can happen at the expense of private sector loan growth. Without more credit growth the Euro area will continue to stagnate, especially given the degree of fiscal austerity that is still required by the rules the system lives by”.
“And that is why I think we will see more easing, within the limits of what the ECB can do - starting with another LTRO next year. But I would still describe this as a pea-shooter policy because it would take ECB government bond-buying to constitute 'bazooka'.”
“Still, I have a huge amount of respect for the Draghi regime at the ECB, which started with a surprise rate cut, moved on to the LTRO, shocked us with the 'anything it takes' comment and continues to surprise. He is incredibly imaginative and innovative, even if he is isn't armed with big enough weapons....”.