A round of European Central Bank policymakers speeches this week can be boiled down to this. All options, including money-printing, are on the table but it will be incredibly hard to get it past ECB hardliners and neither camp sees a real threat of deflation yet.
Reports that the ECB could push deposit rates marginally into negative territory in an attempt to force banks to lend have been played down by our sources, not least because it would distort the working of the money market.
Today, ECB chief Mario Draghi speaks at a Berlin conference. Bundesbank head Jens Weidmann, who opposed this month’s cut in the main interest rate along with about a quarter of the Governing Council, will also be there as will Angela Merkel.
The markets are all a-jitter after minutes of the Federal Reserve’s last meeting appeared to put tapering back on the table in the not too distant future. Interestingly, the Fed did talk about cutting the interest paid to banks on excess reserves.
The leaders of France and Italy called last night for a full-time chair of the Eurogroup of euro zone finance ministers and again pressed for agreement on a mechanism to wind up or rescue failing banks by year-end with the euro zone’s ESM rescue allowed to recapitalize banks directly. Berlin continues to chafe against proposals that smack of mutual liability, given it fears its taxpayers will end up footing the bill.