Frankfurt letter, week beginning March 14
European Central Bank
The European Central Bank (ECB) cut all its main interest rates, expanded its quantitative easing asset-buying program and offered new cheap loans to banks on Thursday to boost the euro zone economy.
The ECB expanded monthly purchases under the asset purchase program from €60 billion to €80 billion starting in April and cut its main refinancing rate by 5 basis points to 0.00 percent.
It also cut its deposit rate by 10 basis points to -0.40 percent and marginal lending rate, which is used by banks to borrow from the ECB overnight, was decreased by 5 basis points to 0.25 percent.
Furthermore, investment grade euro-denominated bonds issued by non-bank corporations established in the euro area will be included in the list of assets that are eligible for regular purchases. And, a new series of four targeted longer-term refinancing operations (TLTRO II), each with a maturity of four years, will be launched, starting in June 2016.
ECB President Mario Draghi said in the press conference that the measures will accelerate the momentum of the euro area's recovery and help inflation to return towards the target of 2 percent.
"Rates will stay low, very low, for a long period of time and well past the horizon of our purchases," Draghi said.
"From today's perspective and taking into account the support of our measures to growth and inflation, we don't anticipate that it will be necessary to reduce rates further,” he added.
- Stocks and economic data
The Euro rallied as Italian central banker Draghi said he did not see further rate cuts. The euro rose to a three week-high against the dollar on Thursday, rallying from a six-week low.
Seasonally adjusted GDP rose by 0.3 percent in the euro area and by 0.4 percent in the European Union during the fourth quarter of 2015, compared with the previous quarter, according to an estimate published by Eurostat last week; the statistical office of the European Union.
- News from Germany
German exports fell by 0.5 percent on a seasonably adjusted basis in January, following a 0.7 percent decline in December, data from the Federal Statistical Office, Destatis showed on Thursday. At the same time imports increased 1.2 percent on the month.
The Ifo Institute has cautioned against a Brexit. "Britain’s departure from the EU would have many negative economic consequences not only for the country itself, but also for the EU and Germany", said Gabriel Felbermayr, director of the Ifo Center for International Economics on Monday in Munich.
Siemens AG said on Wednesday it would cut about 2,500 jobs at its Process Industries and Drives division, most of them in Germany, in response to intense competition in the oil and gas, metals and mining sectors.
The BMW Group, the fourth largest company in Germany, celebrated its 100th anniversary and announced their new motto for the centenary celebrations – The Next 100 Years. The Group also unveiled its new concept car "Vision Next 100".
- Next week ahead
This week, the global markets will monitor data on Eurozone inflation, employment and international trade in goods, as well as news from the ECB.