The ECB's new ways of – and subsidized the banks

According to the Central banks in the United States and the United Kingdom, the European Central Bank (ECB) to help to preserve the economy before an economic

The ECB's new ways of – and subsidized the banks

According to the Central banks in the United States and the United Kingdom, the European Central Bank (ECB) to help to preserve the economy before an economic crash in a hurry now. But other accents than their Anglo-Saxon colleagues, who have lowered the benchmark interest rate by a half a percentage point. Contrary to what many observers expected the ECB to reduce the current negative interest rate even further. He remains at -0.5 percent.

Instead, the Central Bank relies on two other measures: more bonds, cheap loans to the banking sector, purchases and additional temporary. Up to the end of the year, the ECB wants to deploy an additional 120 billion euros for the purchase of bonds on the market – in addition to the monthly € 20 billion, the Central Bank, the system for your run used, open-ended purchase program. With this additional pulse, the ECB hopes to influence a calming effect on the markets, as its President Christine Lagarde said on Thursday at the media conference. Especially corporate bonds are to be purchased.

the core element of the new ECB package of Measures are additional, immediately available funding for the banks to exceptionally favorable conditions. The ECB goes even so far that they charged the banks for the new medium-a negative interest rate of -0,75% and crediting. This is so under the Negative rate of -0.5 percent, the banks for their excess reserves at the ECB have to pay.

Breathe a sigh of relief at the SNB

The ECB is the first Central Bank ever subsidised the banking sector directly, by addressing their interest rates for loans to banks are lower than for deposits held at the ECB. For the banks a financial incentive to lend to the real economy, instead of the excess funds at the ECB to "bunkering is in order". In this way, the Frankfurt monetary authorities want to encourage the banks to extend their loans to businesses, especially to small and medium– sized as possible and renew it.

Surprisingly, the quiet of the ECB to keep the benchmark interest rate is. It may be due to the Efforts of Lagarde, a stronger consensus in the ECB governing Council. In particular, Germany has locked himself repeatedly against interest rate easing steps – the former ECB President, Mario Draghi, had set itself but with the majority of the rest of the Euro-a Central banker over the objections away. In fact, the ECB was able to communicate according to a statement from Lagarde, acting unanimously on a stimulus package.

Big will be the facilitation of the Swiss national Bank (SNB) is the interest rate-zero decision. The ECB, with the expected reduction would have reduced to -0.6 percent, the difference to the Swiss key interest rate range from -0.75 per cent, still more, the SNB under pressure to act, in turn, interest draw political track. For the interest rate differential to the Euro area is currently the most important line of defense against excessive strengthening of the Swiss franc, apart from interventions in the foreign exchange market.

Created: 12.03.2020, at 22:41

Updated Date: 13 March 2020, 08:03

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