The facts exceeded expected by the markets. The European Central Bank (ECB) cut its main refinancing rate to zero, large purchase of bonds and punishment more to banks that deposit their money in the institution.
despite the ECB’s efforts for director of market strategy, Dr. Guillermo Aboumrad , “the measures announced will have a limited effect on the economy of the region” situation was reflected in the markets going from an initial euphoria to a more defensive stance that ended with a sale of riskier assets.
for the specialist Finamex , the mechanism of monetary stimulus “are exhausted “and is necessary to accompany them with other tax measures, although in this area” there are also limitations due to the legacy of high debt “from the global crisis of late 2008.
the ECB lowered as a surprise the refinancing rate of 0.05 percent to zero, the deposit of -0.3 to -0.4 percent and 0.3 credit to 0.25 percent.
the measures announced by ECB were also bounded by context of a weakening in oil prices.
Another important feature of the monetary policies is that in some cases it is resorting to the application of negative interest rates, in order to discourage commercial banks to leave the money in the vaults of central banks and thus induce them to pay more resources.
the negative interest rates seem to point in the right direction to stimulate lending; but Dr. Aboumrad, no conditions that can fill a greater effect, as would the existence of a solid and lower commercial banking regulations. While consumers have a high level of debt and uncertainty about the future of their income.
The balance sheets of commercial banks may be the most adversely affected with policy rates negative interest because they threaten their already reduced low profitability.
cheap money key
Among the main measures that surprised markets is zeroing the refinancing rate, which banks use to borrow money at the central bank in a day.
while expanded its program of asset purchases to 80 billion euros per month from the previous 60 billion euros, beating market expectations that expected a rise to 70 billion.
Additionally, fell 10 basis points to the deposit rate by holding it in -0.4 percent .
the ECB also said it would start buying corporate debt and launch new rounds of cheap credit so that banks extend to the plaintiffs funding.
the ECB said next rounds of cheap loans to banks to four years included in some cases some incentives to encourage them to move loans to third parties.
with the ECB’s decision to lower benchmark rates and increase bond purchases , the major central banks around the world increasingly divided into two camps. The first comprises those who are delving into aggressive stimulus policies to encourage their economies and, second, those who have started a cycle of rise in the cost of money.
On the other side of institutions that are implementing major stimuli are led by the European Central Bank, the Japan and China .
In the second camp are those that are on track to withdraw monetary stimulus. Stresses the Federal Reserve of the United States and major central banks Latin America , where stands the case of aggressive hike in the benchmark rate of Brazil .
Unlike what happened during the last global economic crisis, in late 2008, where all economic policy measures, including the central bank, were focused out recession, now before the economic downturn, monetary policies march in opposite ways.
the nations that are implementing further stimulus will basically betting on the combination of cheap money with relatively weak currencies .
The measures announced by the ECB may favor nations like Mexico because in the European market can be found conditions to access financing for both private sector and government.
another positive angle means that Mexico can be a “magnet” for European capitals due to the combination of attractive yields with better irrigation to which other countries have equal development.
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