Arab Today, arab today ecb to begin new year with rates on hold
Last Updated : GMT 02:09:37
Arab Today, arab today
Arab Today, arab today

ECB to begin New Year with rates on hold

Arab Today, arab today

Arab Today, arab today ECB to begin New Year with rates on hold

Frankfurt - AFP

The European Central Bank, which has cut interest rates the past two months, looks set to hold its fire until it can better assess how effective its previous actions have been. Last month -- on the same day that EU leaders met in Brussels in what was seen as a make-or-break crisis summit -- the ECB brought eurozone borrowing costs back down to their previous historical low of 1.0 percent, effectively reversing this year\'s two earlier rate hikes. On top of that, it offered banks in the region an unlimited pool of liquidity by loosening collateral rules, cutting the minimum reserve ratio and launching new three-year loans at super-cheap rates. Thus, it is unlikely to announce any new measures at its regular monthly meeting on Thursday as it waits to see how those previous moves are panning out, analysts said. \"We expect the ECB to leave policy rates unchanged at its monthly policy meeting on Thursday, and also expect no further announcement of non-standard measures at this point,\" said Goldman Sachs economist Dirk Schumacher. \"Before taking further measures, the ECB will likely want to have more clarity on how the macro picture is evolving and how successful the measures taken in December have been in stabilising the situation,\" the expert said. UniCredit\'s chief eurozone economist, Marco Valli, agreed. \"After two exciting meetings in November and December, on Thursday the ECB is unlikely to announce any meaningful policy change,\" he said. Valli said he would not rule out a move completely, but judged it unlikely, especially because some members of the ECB\'s rate-setting governing council voted against the last cut in December. Nevertheless, \"while steady rates seem the most likely outcome, the ECB is set to retain a clear easing bias, reflected in the \'substantial downside risks\' to the growth outlook,\" Valli said. The governing council will also need to take stock of a raft of conflicting data to gauge the strength of the eurozone economy. On Wednesday, figures showed that the German motor driving eurozone growth went into reverse in the last quarter of last year, likely contracting slightly, despite growing by 3.0 percent over the whole of 2011. The effects of the unprecedented liquidity measures also remain unclear at the start of the new year. Even though banks borrowed nearly half a trillion euros from the ECB last month in a brand-new three-year lending facility, so far they have been largely stashing it at the ECB. Over the past few days, eurozone banks have been parking record sums with the ECB, even though they earn much less interest there than on the interbank market. In general, the ECB sees its role in the long-running debt crisis as limited, insisting it is up to national governments to find a long-lasting and sustainable solution. And the controversial bond-buying programme launched under the previous head, Frenchman Jean-Claude Trichet, is only temporary, ECB chief Mario Draghi has insisted. Nevertheless, Commerzbank chief economist Joerg Kraemer predicted that the ECB could find itself \"forced into the role of state financier over the coming weeks because finance ministers are not keeping pace with the demands of critical investors.\" Upscaled intervention \"should ensure that the debt crisis does not openly escalate and that there are no shock waves like those caused by Lehman Brothers\' collapse,\" Kraemer said. Nevertheless, the ECB \"cannot actually solve the crisis,\" he warned.  

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Arab Today, arab today ecb to begin new year with rates on hold Arab Today, arab today ecb to begin new year with rates on hold

 



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