Markets eye Europe central bank's next move

The European Central Bank is set to hold fire at its pre-Easter policy-setting meeting on Wednesday, as it continues to assess the impact of recent anti-crisis moves, analysts say.

The ECB's governing council has brought forward its regular monthly meeting to Wednesday, owing to the Easter holidays.

But it is not expected to announce any changes in interest rates -- currently on hold at the historically low level of 1.0 percent.

Indeed, ECB watchers are keen to see whether president Mario Draghi has any further cards up his sleeve to bring the long-running sovereign debt crisis to an end, or whether the bank is now drawing up a so-called "exit strategy" to wind down the raft of recent exceptional policy measures.

The ECB has played fire-fighter since the start of the crisis, cutting interest rates, buying up the bonds of debt-mired countries, and most recently, pumping more than 1.0 trillion euros ($1.3 trillion) into the banking system in a bid to avert a dangerous credit squeeze.

In the wake of such moves, analysts believe the ECB will now hold its fire as it assesses what effects its actions are having.

"We expect no change in the (interest) rate and no announcement of further liquidity measures," said UniCredit economist Marco Valli.

Berenberg Bank senior economist Christian Schulz agreed.

"There are no surprises likely at this week's ECB meeting," he said.

"We expect the ECB to keep interest rates at 1.0 percent. We also do not expect Draghi to announce new stimulus measures, while not closing the door on them either."

ING Belgium economist Carsten Brzeski noted that some officials already seem to be talking about an exit strategy.

Last week, ECB member Benoit Coeure insisted that "a timely exit from non-standard measures and a return to a less accommodative stance -- once the economic conditions are ripe -- are essential."

Low interest rates over long periods "might fuel excessive risk-taking, leverage and asset price bubbles ... (and) might discourage banks, companies and governments from strengthening their balance sheets and therefore create a dependence on low rates," Coeure argued.

Schulz at Berenberg Bank suggested, however, it was too early for the central bank to consider hanging up its fire-fighting helmet at this point.

"Economic data for the eurozone shows that the currency zone remained in recession in the first quarter," he said.

Inflation was on a downward trend and "monetary growth and lending to the private sector remain weak," he said.

ECB officials insist the liquidity measures have been a success but central bankers and analysts agree they will not be enough to solve the eurozone's crippling debt crisis on their own.

"We must realise that all the money we put on the table will not buy us a lasting solution to the crisis," said ECB governing council member and Bundesbank President Jens Weidmann.

"All we can buy is time, time that must be used to address the root causes of the crisis," he said.


Editor’s note:Yahoo Philippines encourages responsible comments that add dimension to the discussion. No bashing or hate speech, please. You can express your opinion without slamming others or making derogatory remarks.

  • Britain's tied visa rules fuel abuse of live-in maids, nannies

    By Katie Nguyen LONDON (Thomson Reuters Foundation) - When Susi, a single mother from the Philippines, left for a job in Qatar, she convinced herself it was a sacrifice worth making for her children at home. For more than a year, Susi's sacrifice involved waking before dawn and working past midnight, cooking, cleaning and looking after a Qatari family. Conditions deteriorated when Susi was brought to Britain by her boss. …

  • SE Asia Stocks - Philippines at four-month low after Q1 GDP miss

    BANGKOK, May 28 (Reuters) - Philippine shares hit a more than four-month low on Thursday after economic growth in the first quarter was slower than expected, while Thai stocks retreated after disappointing ... …

  • Philippine economic growth slows to 5.2 percent in 1Q

    MANILA, Philippines (AP) — Sluggish government spending slowed Philippine economic growth in the first quarter of this year, officials said Thursday. …

  • PSE to sell Makati and Ortigas offices
    PSE to sell Makati and Ortigas offices

    Set to move to a unified headquarters in Bonifacio Global City in 2016, the Philippine Stock Exchange (PSE) has issued plans to sell their offices in Makati and Ortigas. PSE President Hans Sicat issued that PSE means to sell the offices, but that they may also opt to rent them out instead. …

  • ‘Inland areas could be exposed to tsunami-like waves’
    ‘Inland areas could be exposed to tsunami-like waves’

    While strong earthquakes cause tsunamis in coastal areas, the Philippine Institute of Volcanology and Seismology (Phivolcs) warned that inland areas could also be exposed to tsunami-like waves, or seiche, if located near or around bodies of water. In a recent earthquake awareness seminar in Muntinlupa, Phivolcs supervising science research specialist Joan Salcedo explained that a seiche is a large wave similar to a tsunami, triggered by strong ground shaking from an earthquake or volcanic …

  • China gives ‘gentle reminder’ to Phl, warns small nations
    China gives ‘gentle reminder’ to Phl, warns small nations

    China gave the Philippines a “gentle reminder” last Tuesday that Beijing will not bully small countries but warned these nations not to make trouble willfully and endlessly. “Here is a gentle reminder to the Philippines: China will not bully small countries, meanwhile, small countries shall not make trouble willfully and endlessly. The Chinese Foreign Ministry also said that China would continue to build other civilian facilities on relevant maritime features in the disputed Spratly Islands …

  • Back-channel diplomacy pushed for Phl-China dispute
    Back-channel diplomacy pushed for Phl-China dispute

    The Philippines should consider backchannel diplomacy to prevent its territorial dispute with China from deteriorating further, Sen. Ferdinand Marcos Jr. said yesterday. There are a lot of Filipino businessmen with businesses in China and they have friends and connections there. Let’s utilize that, ask them to talk to their friends on how we can resolve this matter peacefully,” Marcos said. …

  • Phl, Japan to deepen ties amid China sea claims
    Phl, Japan to deepen ties amid China sea claims

    Japan and the Philippines are set to bolster security ties when President Benigno Aquino visits Tokyo next week, the latest move by Prime Minister Shinzo Abe to beef up cooperation with Southeast Asian nations facing China’s growing naval ambitions. The two sides will likely agree to start talks on a framework for the transfer of defense equipment and technology and to discuss a possible pact on the status of Japanese military personnel visiting the Philippines to facilitate joint training and …


Should Aquino be held accountable over the Mamasapano operations?

Poll Choice Options