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From the Guardian:

ECB imposes negative rates on banks, and cuts benchmark interest rate to 0.15%

Breaking: The European Central Bank has cut the refinancing rate, the headline interest rate across the eurozone, to 0.15% from 0.25%.

And it has also taken the historic decision to impose negative interest rates on the region's banks, to -0.1% from 0.0%

If this is all, it will not do much. We will drop towards all-out deflation in a few month.

by rz on Thu Jun 5th, 2014 at 07:49:53 AM EST
Further monetary policy measures to enhance the functioning of the monetary policy transmission mechanism will be communicated in a press release to be published at 3.30 p.m. CET today.

Lets see what this is going to be.

by rz on Thu Jun 5th, 2014 at 07:53:59 AM EST
[ Parent ]
ECB announces features of monetary policy operations with settlement until December 2016
The Governing Council of the ECB has today decided to continue conducting its main refinancing operations (MROs) as fixed rate tender procedures with full allotment for as long as necessary, and at least until the end of the Eurosystem's reserve maintenance period ending in December 2016.

Furthermore, the Governing Council has decided to conduct the three-month longer-term refinancing operations (LTROs) to be allotted before the end of the Eurosystem's reserve maintenance period ending in December 2016 as fixed rate tender procedures with full allotment. The rates in these three-month operations will be fixed at the average rate of the MROs over the life of the respective LTRO.

In addition, the Governing Council has decided to discontinue the Eurosystem's special-term refinancing operations with a maturity of one maintenance period, following the operation to be allotted on 10 June 2014.

Finally, the Governing Council has decided to suspend the weekly fine-tuning operation sterilising the liquidity injected under the Securities Markets Programme, following the operation to be allotted on 10 June 2014.



A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Thu Jun 5th, 2014 at 10:13:36 AM EST
[ Parent ]
ECB announces monetary policy measures to enhance the functioning of the monetary policy transmission mechanism
In pursuing its price stability mandate, the Governing Council of the ECB has today announced measures to enhance the functioning of the monetary policy transmission mechanism by supporting lending to the real economy. In particular, the Governing Council has decided:

To conduct a series of targeted longer-term refinancing operations (TLTROs) aimed at improving bank lending to the euro area non-financial private sector [1], excluding loans to households for house purchase, over a window of two years.

To intensify preparatory work related to outright purchases of asset-backed securities (ABS).

...



A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Thu Jun 5th, 2014 at 10:15:30 AM EST
[ Parent ]
Finally, the Governing Council has decided to suspend the weekly fine-tuning operation sterilising the liquidity injected under the Securities Markets Programme, following the operation to be allotted on 10 June 2014.

This sounds good to me.

by rz on Thu Jun 5th, 2014 at 10:31:31 AM EST
[ Parent ]
ECB introduces a negative deposit facility interest rate
* Deposit facility interest rate cut effective as of 11 June 2014
* Negative rate to apply also to average reserve holdings in excess of the minimum reserve requirements and other deposits held with the Eurosystem

When deciding to lower the key ECB interest rates at its meeting today, the Governing Council of the ECB took the decision to cut the interest rate on the deposit facility to -0.10%.

This change will come into effect on 11 June 2014, together with the changes to the interest rates on the main refinancing operations and on the marginal lending facility. The negative deposit facility interest rate will also apply to:

(i) banks' average reserve holdings in excess of the minimum reserve requirements;
(ii) government deposits held with the Eurosystem that exceed certain thresholds that will be set in the relevant Guideline to be published by 7 June;
(iii) Eurosystem reserve management services accounts if not currently remunerated;
(iv) participants' account balances in TARGET2;
(v) non-Eurosystem NCB balances (overnight deposits) held in TARGET2;
and
(vi) other accounts held by third parties with Eurosystem central banks when stipulated that they are not currently remunerated or are remunerated at the deposit facility rate.

Wait till Hans Werner Unsinn finds out that the ECB will charge for Target2 balances...

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Thu Jun 5th, 2014 at 10:19:59 AM EST
[ Parent ]
I don't get it. What does it mean? How charges for what? I know Target 2 has been a hot issue with the inflation paranoia crowd, but I do not understand what is said here.
by rz on Thu Jun 5th, 2014 at 10:30:36 AM EST
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I think I get it know: If the Bundesbank has a positive Target II balance it will have to pay some extra interest rate.

Hans is going to go ballistic. I feel a certain dread, when thinking about the commentary in tonights Tagesschau.

by rz on Thu Jun 5th, 2014 at 10:47:24 AM EST
[ Parent ]
Exactly.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Thu Jun 5th, 2014 at 11:16:58 AM EST
[ Parent ]
A ghost of Keynes' bancor plan that haunts only the Eurozone! Headline: ECB PUNISHES SUCCESS!

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Jun 5th, 2014 at 01:46:25 PM EST
[ Parent ]
Waiting for a Migeru diary to explain this to the profane.

It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II
by eurogreen on Thu Jun 5th, 2014 at 11:03:47 AM EST
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