Is it a rigorous „strict“ policy of the ECB to banks?

The global economy seems to snap to their deep frustration and central bankers have an opportunity to take breath. So at the last meeting of the European Central Bank (ECB) left interest rates unchanged for the third consecutive month at a level of 1 percent.
Heads of institutions shall not be tempted to follow most other leading central banks do not take new reductions to the interest rate closer to 0%. The reason – the ECB remains conservative and will not afford the drastic easing of credit conditions, the price of the risk of inflation.
This approach of the bank, which many characterized as rigorous, may play a negative role for the credibility of the institution as a whole. The reason for this is that the policy of the ECB is not as stringent as described by its leaders, says the analysis of The Economist.
Evidence for this is market interest rates, indicating that credit conditions in the euro area are more favorable than anywhere because of various programs of the ECB to increase market liquidity. Since last week here in the euro overnight interest rates are at record low levels of below 0.3 per cent which is lower than the overnight rate in the UK and more than a little interest in the U.S..
In October, immediately after the collapse of investment bank Lehman Brothers, the ECB decided to provide banks in the euro so much cash as they wish and in ptotsent interest equal to the basic rate. Collateral for the loan was a wide range of financial instruments and the maturity of loans was six months.
At the same time were further quarterly and six-month programs for refinancing, which enabled the banks to turn to the ECB in its every need available money.
Liberal activities of the institution and continued last week when the ECB to offer banks new loans in unlimited amounts – this time due only after one years and an interest rate of only 1 per cent. As a consequence of the operation of the euro area banks received colossal 442 billion. This unlock the path of overnight interest rates down.
The result of the actions of the ECB so that banks can borrow in euro loans at lower interest loans to paundove, whether it’s maturity after 3, 6 or 12 months.
This policy of the central bank of the euro may be autopsy in several directions. The first is that it is clearly a compromise – and serves the interests of a more aggressive moods, and more passive members of the governing body of the institution, which does not provide clear direction for the future intentions of the Bank. Only by drawing on liquidity, it can dramatically affect market conditions and to raise overnight interest rates, which are certain risks to the financial institution.
Criticism can be made from the viewpoint that the ECB provides liquidity to banks neogrnichena but not take steps to release the bank accounts of the bad assets. For example, in the U.S. and the island’s central bank began buying poor assets, which exempted the banks of fresh resources for lending. This means that when the withdrawal of liquidity by the ECB might be that banks are in very unenviable position.
Look at the policy of the ECB shows that the institution does not intervene in support of European governments. It does not buy government bonds issued by governments and seems rather damage the market. If the institution has intervened in the market of government bonds instead of loans to banks poured out, it would have moved a significant interest in the bond market.
Governments themselves do not experience great difficulty in the implementation of emissions, which are generally low risk, but currently trading at low prices. The reason is the enormous needs of the States of the money to fill budget deficits, which removed a significant cost of additional bonds and responsible budgets.
Certainly the approach of the ECB has positive sides, such as the possibility of abrupt change in course when the signals appear to inflation. Positive is that the banks are left to struggle with bad assets and their own difficulties. It is possible, however, inflation is very slow because of problems in the labor market and in the fight to save all banks to stop lending.
This would mean failure of the European Central Bank and its policy and no doubt problems for the euro, which already is not very stable over the last year.

––––––––––––––––– ––––––––––

Finance