PrefBlog

A tale of two economies! Europe contemplates easing:

The European Central Bank is considering a smaller-than-normal cut in the deposit rate if officials decide to take it negative for the first time, according to two people with knowledge of the debate.

Policy makers would reduce the rate for commercial lenders who park excess cash at the ECB to minus 0.1 percent from zero, said the people who asked not to be identified because the talks aren’t public. It would be the first time the central bank has adjusted interest rates by less than a quarter of a percentage point. The concept, which has been discussed by Governing Council members, doesn’t yet have a consensus, the people said.

Members of the council, which is holding a mid-month meeting in Frankfurt this week, have said that a negative deposit rate is a potential tool for warding off deflation. They’ve also cautioned that the consequences of such an unprecedented measure aren’t clear. The central bank this month refrained from cutting the deposit rate even as it reduced its benchmark lending rate to a record low of 0.25 percent, and Governing Council member Jens Weidmann has warned against further loosening of monetary policy.

… while the US contemplates less easing:

The U.S. Federal Reserve is getting closer to curbing its experiment in buying financial assets – but is still a long way from ending the age of easy money.

Recent communications by the central bank show that policy makers are poised to reduce, or “taper,” their monthly bond-buying program. Minutes of the Fed’s October policy meeting, released Wednesday after the customary three-week delay, state that “some” officials believed the pace of purchases could be slowed at “one of the next few meetings,” so long as key indicators continue to show the U.S. economy gaining strength.
…
But the Fed minutes also make it clear that policy makers will slow the bond-buying program because they are nervous about unintended future outcomes – not because they think the economy is ready for higher short-term rates. The majority of the Fed’s leaders favour leaving its benchmark rate near zero for a period that most likely will be measured in years rather than months.

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts off 9bp, FixedResets up 7bp and DeemedRetractibles gaining 6bp. The Performance Highlights table is dominated by losers. Volume was well above average.

This entry was posted on Thursday, November 21st, 2013 at 12:39 am and is filed under Market Action. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.