The European Central Bank Implements Negative Interest Rates: An Alternative Way To Gamble The Future.

"P > Beijing time 5 evening, the European central bank governor Delagi announced that the European Central Bank lowered the deposit interest rate to minus 0.1%, the benchmark refinancing rate was reduced to 0.15%, and the marginal lending rate fell sharply by 35 basis points to 0.4%.

For the European Central Bank, this means a historic moment, becoming the first major central bank to implement negative interest rates.

In response, the euro's response was to suppress first and raise capital markets moderately, but analysts began to worry about the policy effect.

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More than a week ago, Nobel Prize laureate Krugman submitted a written report to Delagi in a tone of voice like "Hey, buddy, you think wrong." in order to prevent the euro zone from falling into Japanese deflation, the European central bank must improve the inflation target that has persisted since 1990s.

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< p > obviously, in the eyes of an economist, the inflation rate target of 2% is too low, which increases the risk that the central bank has no room to cut interest rates -- the so-called lower limit of zero interest rate.

But politicians decided to bet on the future in an alternative way - negative interest rates.

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P last year, the ECB cut interest rates back to last November.

Since the outbreak of the financial crisis in October 2008, in addition to the two increase in interest rates in 2011, the European Central Bank has spent almost every cycle of interest rate cuts.

But the effect of this method is not satisfactory.

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The ECB wants inflation to stay close to below 2%, but inflation in the region has been lower than 1% since October, and even dropped to 0.5% last month, since last October.

According to the data released by the European Union statistics bureau this week, the GDP growth rate in the euro area increased by only 0.2% in the first quarter, which is lower than the 0.3% increase in the first quarter of the revised period.

The eurozone unemployment rate dropped to 11.7% in April, but it is still close to the record high.

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< p > according to the latest forecast made by the European Central Bank on 5, the euro area GDP growth rate in 2014 will be 1%, lower than the 1.2% predicted in March, and the inflation rate in 2014 is expected to be 0.7%, which is also lower than the 1% forecast in March.

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< p > fortunately, the European Central Bank's policy basket is not very limited.

On the 5 th, Delagi also announced a non-traditional monetary policy to stimulate loans to the real economy.

One of the most notable tools is TLTRO (directed long-term refinancing operation).

Compared with the previous rounds of LTRO (long term refinancing operation), TLTRO focused more on the real economy.

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< p > in addition, < a href= "//www.sjfzxm.com/news/index_c.asp" > Europe < /a > will also begin to study the asset backed securities purchase plan (ABS), and will extend the current unlimited supply of funds to the bank, and stop the cancellation of its bond purchases at the beginning of the euro crisis.

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< p > "we decided to implement a set of" a href= "//www.sjfzxm.com/news/index_c.asp > policy mix < /a > to provide more monetary policy easing and support loans to the real economy.

"Delagi said.

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Sebastien Galy, senior currency strategist at P, said that the decision of the European Central Bank is aimed at liquidity, credit and interest rate policy mix.

This action is impressive enough to help the euro area recover faster than expected, and it is also a positive factor for the global economy.

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< p > market is the most direct policy examiner.

After the opening of Delagi's toolbox, the euro first suppressed and later hit the lowest position in February 6th, reaching $1.3503. After that, it rebounded rapidly to 1.3619 dollars at 22:30 on the 5 Beijing time, or 0.17%.

At the same time, most of the stock markets in Europe rose moderately.

As the market saw the action of the European Central Bank blocking deflation, New York's gold price was boosted, rising 0.71% in the aforesaid period, and oil prices fell slightly.

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In the past year, the euro has appreciated 4% against the a href= "//www.sjfzxm.com/news/index_c.asp" > US dollar < /a > exchange rate.

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< p > some experts are cautious about this rare negative interest rate pattern.

Merrion Stockbrokers chief economist Alan McQuaid told the Shanghai Daily reporters that the measures adopted by the European Central Bank will weaken the euro and lead the inflation level to rise.

But banks must accept the European Central Bank's stress test this year and pay attention to their balance sheets. It is hard to see the free lending of banks in the short term, so the measures announced by the European Central Bank may be difficult to produce immediate results.

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Karu Ana, general manager of the bank for International Settlements (P), suggests that the ECB's negative interest rate will not stimulate banks to increase lending.

"In fact, the whole financial market structure is based on positive interest rates, which is the norm.

"In some industry circles, the move has a ripple effect on emerging markets: on the one hand, it can ease the trend of capital escaping; on the other hand, the release of more liquidity will increase inflationary pressure.

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