ECB’s Mario Draghi:”Release the hounds!” On pensioners and savers.
(Bloomberg) — Mario Draghi primed investors for an initial bond-buying salvo on Monday as he signaled European Central Bank officials are convinced they will succeed in choking off the threat of deflation.
Six years after the U.S. Federal Reserve began quantitative easing, the ECB’s Governing Council committed to its first asset purchases next week in a program amounting to 60 billion euros ($66 billion) a month.
The ECB president also unveiled forecasts showing higher economic growth with an inflation outlook that puts officials on track to reach a goal of just below 2 percent.
“Our monetary policy decisions have worked, and it is with a certain degree of satisfaction that the Governing Council has acknowledged this,” he said at a press conference in the Cypriot capital of Nicosia on Thursday. “We see objectives are gradually being obtained.”
Yesterday, we saw the Polish National Bank lower their reference rate to 1.50 percent and their bank deposit rate to 0.50 percent.
The ECB didn’t change their primary interest rate today, but … look out!
The ECB deposit rate is now in negative territory. (The deposit rate is the interest rate paid on the surplus liquidity that credit institutions may deposit overnight in an account with a national central bank that is part of the Eurosystem.)
ECB bond purchases may widen pension deficits by up to 18 percent. Thanks a heap, Mario!
We already have 90 percent of industrialized countries with near zero or below target rates. How many more eggs do the Central Banks have to break to make their omelet?
Of course, savers and small businesses are under siege by Central Banks. As Arthur Cutten of Jesse’s Cafe Americain reminds us ..
I was considering Shakespeare’s “Cry havoc and let slip the dogs of war!”, but the thought of Draghi and IMF’s Lagarde on an Italian tank doesn’t inspire much fear.