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Edition April 21, 2016 - Crédit Agricole S.A.
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  • Edition April 22, 2016

    ECB - "I find your lack of faith disturbing"

    The ECB released the details about the CSPP. However, it will "be mindful of the potential impact of its purchases on market liquidity". We expect the ECB to purchase EUR4bn a month on average. Mario Draghi gave more details on other monetary policy tools. Above all, M. Draghi has fiercely defended the ECB's independence and reiterated the crucial need for governments to do more on structural reforms and growth-friendly composition of public finances.

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  • Content:

    - Monetary policy stance
    - "We obey the law, not politicians"

  • Extract - On the rate trajectory

    The ECB does not estimate that it has reached its lower bound: the rates are expected "to remain at present or lower levels for an extended period of time, and well past the horizon of our net asset purchases." However, answering questions about that issue, Mario Draghi highlighted that for now, there are no sign that negative rates hurt banks' income. However, the ECB is aware of complexity of low interest rates. Obviously, there is a limit to negative rate, a level where the negative consequences outweigh positive effects, and Mario Draghi hinted that that level is not that far.

    Those elements tend to confirm our view that the ECB stands ready to cut further the rates if needed (ie if the exchange rate of the EUR rises too much), but that the ECB is rather reluctant to cut its rate. So we see a rate cut only if the EUR increase dramatically.

  • Associative topics : Economics | Europe

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