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ECB pre−announces gradual exit from emergency liquidity measures

Fri, Nov 6 2009, 08:26 GMT
by KBC Market Research Desk

KBC Bank


  • ECB notes improvement in European activity but remains relaxed about inflation.
  • Trichet hints that ECB won’t renew 12 month funding to banking system after December
  • Markets may think ECB “exit strategy” implies earlier interest rate increases, but…
  • ...Economic outlook still uncertain and the Bank of England eased policy further today.
  • Reducing emergency support to the financial system will be a delicate operation.
  • So we think ECB rates still unlikely to rise before September 2010 at the earliest.

While it was universally expected that the European Central Bank would leave its key policy rates unchanged today, there was quite an amount of interest in the monthly press conference which followed the rate announcement. In recent weeks we have seen a number of Central Banks, most notably the Reserve Bank of Australia and the Norges Bank start to raise interest rates. In contrast, the US Federal Reserve Bank last night repeated its commitment to keep “exceptionally low levels of the federal funds rate for an extended period” while earlier today the Bank of England stepped up its support for the economy by boosting the amount of quantitative easing by a further£25B.

Published on  Fri, Nov 6 2009, 08:29 GMT

KBC Bank  | Havenlaan 12, 1080 Brussels
http://www.kbc.be/dealingroom | piet.lammens@kbc.be

Legal disclaimer and risk disclosure

This non-exhaustive information is based on short-term forecasts for expected developments on the financial markets. KBC Bank cannot guarantee that these forecasts will materialize and cannot be held liable in any way for direct or consequential loss arising from any use of this document or its content. The document is not intended as personalized investment advice and does not constitute a recommendation to buy, sell or hold investments described herein. Although information has been obtained from and is based upon sources KBC believes to be reliable, KBC does not guarantee the accuracy of this information, which may be incomplete or condensed. All opinions and estimates constitute a KBC judgment as of the data of the report and are subject to change without notice.

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