The European Central Bank held a monetary policy meeting on April 30 and decided to inject more liquidity into the Eurozone economy by reducing existing long-term targeted refinancing operation interest rates and increasing emergency refinancing operations to deal with the new crown epidemic. Continuous shock.
Analysts believe that the current economic sectors of the Eurozone are highly dependent on banks for “blood transfusion”, and the European Central Bank ’s liquidity measures are similar to cut interest rates in disguise. At the same time, the market expects the European Central Bank to further expand quantitative easing.
Since the European Central Bank held a monetary policy meeting on March 12, the Eurozone economy continued to deteriorate as the epidemic intensified and the bans escalated. European Central Bank President Lagarde pointed out that the euro zone economy contracted by 3.8% in the first quarter of this year, which reflects the impact of the blockade measures of the countries in the last few weeks of the quarter. Judging from the sharp decline in economic activity in April, the euro zone economy was more affected by the epidemic in the second quarter, and the GDP contraction rate may be as high as 15%.
Lagarde believes that the degree and speed of economic contraction in the Eurozone is “unprecedented”, consumer confidence and business prosperity index “free fall” has declined, and the labor market is large-scale deterioration.
According to the latest forecast of the European Central Bank, the euro zone economy may contract by 5% to 12% in 2020, the actual contraction depends mainly on the duration of the ban measures and related measures Whether it can successfully reduce the impact of the epidemic.
The European Central Bank noticed that due to the deterioration of the overall economic outlook and the increased credit risk of borrowers, Eurozone banks tightened their credit standards for businesses and households in the first quarter. At the same time, the demand for loans or lines of credit by companies in the euro area has surged, and the demand for short-term loans is significantly higher than that for long-term loans.
In order to support the financial system and the real economy, avoid liquidity crisis and the differentiation of the euro, the European Central Bank increased quantitative easing in March, and the total scale of debt purchases this year is expected to exceed 10,000 At the same time, several liquidity measures have been taken to stimulate banks to lend to the physical sector and residents.
On this basis, the European Central Bank announced on April 30 that it has decided to increase the interest rate of the third round of long-term targeted refinancing operations from June 2020 to June 2021 Down by 25 basis points to minus 0.5%, banks that meet additional conditions during the period can even refinance operations at a minus 1% interest rate, which means that banks can obtain central bank discounts by financing from the European Central Bank and lending to the physical sector.
Long-term targeted refinancing operation is an unconventional monetary policy of the European Central Bank, which mainly provides long-term preferential interest rate financing to financial institutions such as banks.
At the same time, the European Central Bank decided to add seven non-directional long-term refinancing operations from May to December this year, with an operating rate of minus 0.25%.
Bellenberg, Germany Holger Schmiding, the chief economist of the Bank of Georgia, pointed out that the new measures of the European Central Bank are similar to a small rate cut.
Chief of the Bank of Baden-Württemberg, Germany Economist Uwe Burkert believes that the European Central Bank ’s full release of liquidity to the market is very beneficial, which is tantamount to further interest rate cuts.
Although the European Central Bank has not adjusted this time Emergency debt purchase plan for the epidemic, but Lagarde emphasized that debt purchases will continue to be carried out in a flexible manner, covering all member countries and different asset classes. Prior to this, the European Central Bank has announced a comprehensive relaxation of collateral requirements, especially the acceptance of Greek national debt As a collateral for financing operations in the Euro system, Broadened the credit rating requirements for collateral, allowing banks to use non-investment grade bonds as collateral to finance from the central bank.
Low risk premium expert Friedrich Heine Mann pointed out that from the recent changes in the premium between the yields of Italian national debt and German national debt, it can be seen that a large amount of southern European government bonds have been purchased in the Euro system.
Heine Mann said that the reduction in the risk premium of the (Italian national debt) is behind investors ’expectation that the European Central Bank is prepared to buy unlimited Italian national debt. Trillion euros. ”
He warned that although the European Central Bank ’s crisis response measures are very effective in the short term, it cannot solve how to refinance under high debt conditions after the crisis in Italy and other countries. Question.
(Originally titled “Financial Observation: European Central Bank disguised” rate cut “as” transfusion “in the Eurozone”)