European markets mixed as ECB meets
July 21, 2016, 9:13 am

European markets are betting Draghi, right, will walk the walk on increasing stimulus in September [Xinhua]

In London, the FTSE opened down 0.36 per cent to 6,705, partially also due to a report from the National Statistics office showed that retail sales had fallen 0.9 per cent.

The CAC 40 in Paris barely nudged up 0.03 per cent to 4,380.

In Frankfurt, where the European Central Bank (ECB) convened today in their first meeting since the Brexit referendum, the DAX was up 0.16 per cent likely on calming of uncertainty following German Chancellor Angela Merkel’s assurances to UK Prime Minister Theresa May to take her time with Brexit.

ECB head Mario Draghi had last month warned that growth in the eurozone would like slow due to Brexit. However, he offered no indication of any measures to be taken by the ECB, leaving many to predict there would be no monetary policy change until September.

But if the ECB decides to expand its current stimulus program, analysts wonder how much more can be done?

Five weeks ago, the ECB started to buy back bonds and corporate debt from companies, in addition to financial institutions.

The quantitative easing plan now involves the ECB buying back 80 billion euros ($88 billion) every month until the program terminates in March 2017 – a total stimulus of over 1.4 trillion euros.

It was also decided then to lower the interest rate on the main refinancing operations of the Eurosystem by 5 basis points to 0.00 per cent and the rate on the marginal lending facility by 5 basis points to 0.25 per cent.

The deposit interest rate was lowered by 10 basis points from -0.30 to -0.40 per cent. It remained the same on Thursday.

This would mean that banks that hold money overnight at the central bank would have to pay for the service; it would, therefore, be in their benefit to encourage lending.

The BRICS Post with inputs from Agencies