Europe - ECB & BOE 01 (May 08 - Nov 11)

[winston]

INTELLIGENCE: (EUR) Trichet: ECB may cut rates again at Nov 6 mtg

(EUR) ECB Pres. Trichet says the ECB may cut rates again at the Nov 6 meeting -a possibility, not a certainty.

[millionairemind]

Oct 29, 2008
The Straits Times
ECB unveils new market measures

FRANKFURT - THE European Central Bank published details on Wednesday of four operations aimed at keeping commercial banks supplied with euros and dollars in a bid to ease tension on crucial money markets.

The ECB said it would lend 103.1 billion euros (S$195 billion) to banks for three months starting on Thursday at its benchmark rate of 3.75 per cent.
A total of 223 banks had requested funds, the ECB said.

In a now regular weekly loan of dollars, meanwhile, the ECB said it had provided US$92.13 billion to 70 banks on Wednesday at a fixed rate of 1.91 per cent.

On Thursday, the ECB will make an unlimited amount of dollars available, again in the form of one-week loans, in two operations that will accept collateral in exchange for the funds in one case and euro cash in the other.

A fixed rate of 3.75 per cent would apply in the former case, while the latter would be carried out at a rate of US$0.000303 to the euro.

In what is called a foreign currency swap, the ECB will sell dollars for euros on Thursday at the rate of US$1.2090 per euro, and buy them back a week later at a rate of US$1.208697 per euro.

The difference, also called 3.03 swap points, is what commercial banks will pay for access to the US currency.

Central banks have essentially replaced interbank markets for now by providing unlimited amounts of liquidity, or cash, to ensure banks can meet minimum reserve requirements which underpin lending to the economy at large.

Money markets determine the availability of credit for vast numbers of people around the globe, from managers trying to fund their businesses to families and students seeking mortgages and personal loans. -- AFP

[millionairemind]

Both 3month LIBOR rates and Euribor rates are edging down very nicely. 3.19 and 4.79 respectively

[millionairemind]

King May Consider Most Radical BOE Cuts Since WWII (Update2)

By Brian Swint

Nov. 6 (Bloomberg) -- Bank of England Governor Mervyn King may have to consider the most radical round of interest-rate cuts since World War II as the financial crisis tears through Britain's economy.

The central bank may need to lower its benchmark rate to zero from the current level of 4.5 percent, say economists including former policy maker Charles Goodhart and Citigroup Inc.'s Michael Saunders. The bank will probably move a step closer when it announces its next decision at noon in London, with economists expecting a cut of at least 50 basis points.

``Rates will go down a long way,'' said Saunders, chief western European economist at Citigroup in London. ``They should be prepared to go to zero.''

The Bank of England's main rate is still the highest among the Group of Seven nations even as evidence mounts that the economy has sunk into a recession. Manufacturing is in the worst slump since the early years of Margaret Thatcher's government, house prices fell the most since 1991 last month and commercial banks are refusing to pass rate cuts on to consumers and businesses.

The Bank of England, which participated in an emergency reduction with six other central banks last month, will probably cut its benchmark to 4 percent today, said 45 of the 60 economists in a Bloomberg News survey.

Nine predict a cut of 1 percentage point and six said the bank will reduce by 75 basis points. The U.K.'s benchmark rate hasn't been cut by more than 50 basis points since 1993, when the U.K. Treasury set monetary policy.

Zero Rates

``Interest rates will go down from now on,'' Goodhart said in a Channel 4 television program broadcast Oct. 27. ``Quite how far and how fast I don't know. They could go to zero. They went to zero in Japan in the 1990s when they had a recession or depression that went on for a long time and was quite severe.''

The Bank of England, founded in 1694 to finance King William III's war against France, has never cut its key rate below 2 percent, keeping it at that level through World War II.

The European Central Bank will probably reduce its main rate by 50 basis points to 3.25 percent later today, said all but one of the 55 economists in a Bloomberg survey. The ECB's decision is due 45 minute after the Bank of England's.

The U.K.'s economy will probably be the worst performer in the G-7 next year, with the European Commission forecasting a contraction of 1 percent. The euro-region will grow 0.1 percent, the U.S. will contract 0.5 percent and Japan will shrink 0.4 percent, the Nov. 3 predictions show.

Rates Burden

Consumers and executives are also saddled with the highest rates, with the Bank of England's benchmark comparing with the Federal Reserve's 1 percent rate.

``With our rate at 4.5 percent, it really is crazy,'' said Roger Bootle, founder of Capital Economics Ltd. in London. ``Rates have got to get down to around 1 percent, and they've got to stay there. I don't rule out zero.''

The Fed's interest-rate cut last week has helped bring down the rates at which banks lend to each other. The London interbank offered rate, or Libor, for three-month dollar loans fell to 2.51 percent yesterday from 4.82 percent on Oct. 10. The rate is still 151 basis points more than the Federal Reserve's benchmark rate, compared with an average of 22 basis points in the five years before the global credit crisis began in August 2007.

Deteriorating Outlook

Reports this week have shown the U.K. economy's downturn is worsening, prompting some economists to revise their forecasts for today's decision and predict a bigger cut. Factory output dropped in September, extending the worst streak since 1980, the statistics office said yesterday. Services from banks to recruiters contracted the most since 1996.

``Monetary easing needs to step up a gear'' after ``terrible'' data, said George Buckley, an economist at Deutsche Bank AG, who had forecast a 50 basis-point cut. ``The escalation of the economic slowdown justifies, in our view, a full percentage point off interest rates.''

U.K. house prices fell 14.9 percent from a year earlier in October, HBOS Plc said today, the most since the index started in 1983. Property values, which tripled in a decade, will fall 30 percent from their October 2007 peak over three years, Fitch Ratings said yesterday.

Output Drops

The U.K. economy shrank 0.5 percent in the three months through October, the National Institute of Economic and Social Research said in a report today. Output is now lower than it was a year ago, the first annual drop since 1990, the report showed.

Slowing growth and plunging oil prices are also likely to push inflation, which accelerated to 5.2 percent in September, back toward the central bank's 2 percent target. The Bank of England said in August that inflation could undershoot that goal in two years. The central bank publishes updated forecasts on Nov. 12 in its quarterly inflation report.

``I don't think anybody believes this cut will be the end of it,'' said Saunders, who predicts rates will probably fall to 2 percent. ``The U.K. had one of the biggest credit and housing booms and the biggest drop in savings, so that makes us more exposed to the unwinding of it all.''

[mocca_com]

Bank of England Cuts Key Rate to Lowest Since 1955 (Update3)

By Jennifer Ryan

Nov. 6 (Bloomberg) -- The Bank of England unexpectedly cut the benchmark interest rate by 1.5 percentage points to the lowest since 1955 as policy makers tried to limit damage caused by the worst banking crisis in almost a century.

The nine-member Monetary Policy Committee, led by Governor Mervyn King, reduced the bank rate to 3 percent, the biggest single step in more than a decade. The move was predicted by none of the 60 economists in a Bloomberg News survey.

``It's absolutely staggering and deeply impressive,'' said Brian Hilliard, director of economic research at Societe Generale in London. ``They are clearly grasping the nettle and taking deep action. Boy, this is going to have an impact.''

The seizure in credit markets has left Britain on the edge of its first recession since 1991, prompting a 50 billion-pound ($80 billion) bank rescue package from the government and a half-point emergency rate cut on Oct. 8. With the economy headed into recession, the danger is that inflation will slow more than policy makers want.

``The risks to inflation have shifted decisively to the downside,'' the Monetary Policy Committee said in a statement. Policy makers ``judged that a significant reduction in Bank Rate was necessary now in order to meet the 2 percent target'' for inflation.

The pound dropped immediately after the decision before rebounding. It traded at $1.6011 at 12:30 p.m. in London compared with $1.5898 before the decision.

Policy Response

Global policy makers are escalating their response to the global credit crunch after a coordinated round of global cuts last month. The European Central Bank today reduced its benchmark rate by 50 basis points and the Swiss central bank unexpectedly trimmed its main lending rate by 50 basis points.

The Federal Reserve last month lowered its main rate to 1 percent, matching the lowest in a half century.

The Bank of England is working with the government to limit the fallout from what it calls the worst global banking crisis in almost a century. Prime Minister Gordon Brown was forced last month to broker a takeover of HBOS Plc and Bank of England figures show financial institutions in the U.S. and Europe have already suffered $2.8 trillion in securities losses from the crisis.

``They're admitting that this recession is going to be very painful and have a huge impact on inflation,'' said George Buckley, an economist at Deutsche Bank AG in London. ``This is obviously a lot of help but it remains to be seen how much gets passed through.''

Shares of Tomkins Plc fell the most in 16 years today after the U.K. maker of auto parts and building materials said markets have worsened ``considerably'' since the end of June. Bovis Homes Group Plc, the U.K.'s most profitable homebuilder, said today falling prices are hurting margins.

Manufacturing is in its longest contraction since 1980, while U.K. house prices fell an annual 14.9 percent in October, the most in at least 25 years, HBOS Plc said today. Unemployment claims rose to the highest level in almost two years in September.

``There has been a very marked deterioration in the outlook for economic activity at home and abroad,'' the Bank of England said today. ``The availability of credit to households and businesses is likely to remain restricted for some time.''

[millionairemind]

Hello Mocca_com,

Welcome to Huatopedia and tks for your first post!!!

We wish you have a great time here and we look forward to your many posts in the future.

Cheers,
mm

[blid2def]

Actually mocca joined a few days after we started - see the join date.

[millionairemind]

Actually mocca joined a few days after we started - see the join date.

Yes. I noticed he/she always a silent reader. So I am happy that he/she started posting mah..

[millionairemind]

ECB Cuts Interest Rate by Half Point to Counter Economic Slump

By Christian Vits

Nov. 6 (Bloomberg) -- The European Central Bank lowered interest rates for the second time in less than a month to counter the euro region's worst economic slump in 15 years.

ECB policy makers meeting in Frankfurt reduced the benchmark lending rate by half a percentage point to 3.25 percent, as predicted by all but one of 55 economists in a Bloomberg News survey. The ECB cut the rate by the same amount when it joined a globally coordinated move on Oct. 8 in response to the deepening financial crisis. The Bank of England today lowered its key rate by 1.5 percentage points to 3 percent and Switzerland's central bank lowered rates in an unscheduled move.

[blid2def]

Actually, I think he/she deserves a caning for waiting for about 6 months before posting...