Markets rally as ECB hikes growth forecasts and begins QE – as it happened
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Version 0 of 1. 4.46pm GMT16:46 European stock markets have closed at their highest level since November 2007, the early days of the financial crisis. Joost Van Leenders, chief economist of multi-asset solutions at BNP Paribas Investment Partners, says Mario Draghi reassured investors: “He showed his determination to stick with the programme and dismissed ... the problem (that sellers will be hard to find).... “Overall that’s positive for equities.” And that’s probably all for tonight. Back tomorrow. Thanks, and goodnight. GW 4.38pm GMT16:38 The ECB has focused attention back on Cyprus by holding this month’s meeting in Nicosia. And while the island has outperformed Greece in implementing reforms – and is now on track to exit its €10bn euro bailout programme ahead of schedule - it still faces the threat of non-performing loans. Helena Smith reports: Prior to opening today’s conference, ECB chief Mario Draghi warned that while Cyprus had made “remarkable” economic progress it was “equally no time for complacency.” Non-performing loans – at €23bn well in excess of the island’s total output of €17bn - are still seen as the biggest obstacle to financing the local economy. At close to half of banks’ total lending and still on the rise, they are also viewed as the greatest challenge to the Cypriot banking system. Draghi urged the government to impose legislation that would reduce NPLs (nearly a third of which are owned by individual borrowers). President Nikos Anastasiades government has drafted a foreclosure law but delayed enforcing it until an insolvency law is also passed to ensure that vulnerable borrowers - small- time entrepreneurs and home-owners – are protected. Across the board foreclosures could result in even greater financial chaos if the latter are hit. “With the exception of the NPLs, the Anastasides administration has been very eager, very nerdish about implementing what was asked of them by creditors,” said Hubert Faustmann, associate professor of history and political science at the University of Nicosia. “While there has been some domestic resistance it has always been overcome.” As the EU’s only bailed out state to have forced its depositors to have shared the burden of a rescue – with the infamous “bail in” of accounts worth more than €100,000 – anger towards creditor bodies like the ECB is still rife (as Wednesday’s night protests in Nicosia illustrated). But Cyprus’ better-than-expected recovery has also shown that micro-economies are much more difficult to predict. “They can be much more influenced by events, very little can do a lot of good,” said Faustmann calling Cyprus “the north of the south.” “People here are hard working,” he insisted, adding: “Elite corruption, though endemic, is far less destructive than it is, say in Greece, and the mentality has many western European traits partly as a result of the British legacy albeit mixed with Mediterranean and oriental values.” Updated at 11.04am GMT 4.27pm GMT16:27 Why is Mario Draghi like Diego Maradona? Read Heather Stewart’s analysis to find out: ECB meeting: Mario Draghi is upbeat but eurozone risks remain 4.16pm GMT16:16 Christopher Vecchio, currency analyst at DailyFX, says Mario Draghi is responsible for the euro plumbing new 12-year lows this afternoon: When President Draghi revealed that there would be a cap on the QE program – the ECB would not buy bonds whose yields were below the interest rate corridor floor of -0.20% - the Euro hit the skids. Perhaps this is an indication that market participants feel there simply won’t be ample supply of short-dated debt for the ECB to purchase in order to make its QE program viable; thereby boosting the possibility that the ECB will have to enact more easing down the road, as its current program eventually falls short of its goals. The icing on the cake was when President Draghi admitted that the ECB’s QE program could extend past September 2016, seemingly in conflict with the earlier assessment that the ECB would achieve its mandate of price stability by 2017.” 4.11pm GMT16:11 Marc Ostwald of ADM Investor Services reckons Mario Draghi was particularly assertive today: This was Draghi at his chest thumping best, boasting of the ECB’s success in bringing down long-term interest rates, and corporate lending rates (emphasizing convergence across the Eurozone, though omitting the fact that this does not apply to Greece and Cyprus), even before the actual QE programme has started. The UK’s Sun newspaper might headline a story on this press conference with the headline “It was the ECB wot done it” 4.08pm GMT16:08 Analysts at Teneo Intelligence have produced a handy wordmap. It shows the differences between Mario Draghi’s statement today and the one at the previous meeting in January: They add: Regarding the program’s duration, Draghi made no effort to clarify the tension between the two possible endpoints he had suggested in January: either September 2016 as a fixed date or once a sustained adjustment in the path of inflation is underway. The still frequent use of “credit”, “recovery” and “unemployment” in his opening remarks today might suggest Draghi’s sense of urgency has not ebbed away since January. If sustained, this could eventually translate into a more flexible handling of the duration of the purchasing program. 3.52pm GMT15:52 After hitting a 12-year low during Draghi’s press conference, the euro is hovering around $1.104 to the US dollar. Alex Edwards, head of the corporate desk at UKForex, predicts it will keep falling: “Putting it mildly, there isn’t a lot of confidence in the euro system at the moment. Breaking through 1.10 will likely mean a new range is soon carved out in EUR/USD. Given the market’s current reaction to Draghi’s comments, it might not be long before we see parity with dollar.” 3.44pm GMT15:44 European stock market have rallied, on the prospect of eurozone QE beginning on Monday. The French CAC and German DAX indices are both up around 1.1% in late trading. 3.41pm GMT15:41 Got more questions about the PSPP programme? Here’s the place to go: ECB's QE Q&A includes 6 occurrences of the word "flexbility". http://t.co/HMzcbveJZi 3.37pm GMT15:37 ECB press conference: the key points We’ve enjoyed some vintage European Central Bank press conferences over the years, especially since Mario Draghi took charge. Today’s session in Cyprus wasn’t one of them, alas. Maybe the ECB circus just doesn’t travel well. But it wasn’t a waste of time. Here’s the key points 1) Draghi fired the starting gun on QE. After a long wait, the ECB’s stimulus programme (PSPP) will begin on Monday, snaffling up €60bn of bonds per month in an attempt to stimulate demand and push inflation up. And the programme will run until September 2016, Draghi said, and might last longer if inflation isn’t on a ‘sustained path’ by then. 2) The ECB is more optimistic about the eurozone economy. The latest staff forecasts show the eurozone growing by 1.5% this year, up from 1.0% three months ago, then by 1.9% in 2016 (up from 1.5%). And although inflation will be zero this year, it is expected to rise to 1.8% by 2017. Some economists are suggesting this is too optimistic, but it chimes with more upbeat data in recent weeks. 3) The ECB is keeping a tough line with Greece. Draghi insisted, twice, that his central bank was providing all the support possible to the Greek economy. And he also confirmed that another €500m of liquidity assistance had been provided, taking the total to €68.8bn. But Draghi also appeared to rule out handing Athens a lifeline by allowing Greek banks to buy more of the country’s short-term debt. That would break rules on monetary financing, he argued. 4) Cyprus’s bailout woes may be easing. The country’s central bank chief predicted that the last capital controls, introduced almost two years ago, will be lifted by the end of the month. Updated at 3.41pm GMT 3.03pm GMT15:03 This is a good summary: .@lorcanrk has your ultra-simple explanation of how ECB QE is going to work. http://t.co/Amd27vH9FG 2.57pm GMT14:57 Eurozone QE: the details The European Central Bank has just released details of its new quantitative easing programme. Here are the key points: 1) It has been christened the Public Sector Purchase Programme, or “PSPP” (which doesn’t flow off the tongue). 2) PSPP will involve the purchase of €60bn of public and private sector securities each month, in a way designed to “avoid interfering with the market price formation mechanism: 3) It will be able to buy bonds trading at a negative yield (ie, above face value), as long as the yield is still above the deposit facility rate (currently -0.2%). 4) PSPP will buy debt issued by various eurozone agencies and institutions, as well as government debt: 5) If there is not enough of a particular type of debt available, “substitute purchases are foreseen.” Note "substitute purchases". So annoying when online shopping - you click on Bunds, then they deliver European Atomic Energy Community bonds Here’s the full release: Implementation aspects of the public sector purchase programme (PSPP) 2.32pm GMT14:32 It’s been a funny old press conference: Funny moment at ECB presser as Cypriot CB Governor says "I'll answer in Greek" and then carries on speaking English. 2.25pm GMT14:25 Georghadji: Remaining capital controls to be lifted soon 2.25pm GMT14:25 It’s nearly two years since the Cyprus bailout; with hindsight, would the ECB do anything differently? Draghi bats it over to Cyprus central bank president Chrystalla Georghadji. Georghadji says that the decisions taken two years ago were very painful for the country and its people. But there was no other way.... we should have taken measures before the very difficult decision was taken. When might capital controls be lifted? The very few capital controls that are still in place will be lifted...probably before the end of the first quarter of the year, Georghadji replies. 2.22pm GMT14:22 How does the ECB see core inflation changing in the months ahead? Draghi explains that the forecasts for headline inflation (see earlier in the blog) are not only based on oil prices; they also reflect household disposable income and the progress in closing the ‘output gap’ * Draghi - closing of output gap seen happening gradually through 2017 - RTRS 2.19pm GMT14:19 Draghi is reiterating that the ECB has lent €100bn to Greece: The last thing you can say is that the ECB is not supporting Greece. 2.19pm GMT14:19 Oops... Cyprus’s central bank governor, Chrystalla Georghadji, just mentioned the dreaded T-word. Highlights: Cyprus CB governor accidentally saying 'Troika' and the shouty crackers guy asking a question. Not the best ECB presser ever. She was explaining that Cypriot bonds could be included in the QE programme once its lenders are happy with its bailout progress (currently they’re not happy, because MPs haven’t passed a law to speed up foreclosures) 2.15pm GMT14:15 The euro has hit new 11-year lows since the press conference began #Euro drops to $1.1007, fresh 11year low on Draghi comments. pic.twitter.com/smuE6HsMm5 2.14pm GMT14:14 Don’t blame us.... Draghi: The Greek waiver existed as long as programme was by and large on track 2.13pm GMT14:13 Draghi appears to be criticising the new Greek government: Draghi is basically implying the Greek govt is undermining the solvency of the Greek banks w bad communication. Hey Athens, he hve a problem 2.12pm GMT14:12 This is an important point -- the ECB could start accepting Greek bonds as collateral again, if Greece meets upcoming debt repayments. #Draghi: ECB ready to resume Greek waiver if conditions met; ECB could buy Greek debt from July/Aug as soon as Greece repays SMP bonds due Draghi also defends the decision to remove the waiver last month -- given the pronouncements of the Greek government, we had no choice, he says. 2.11pm GMT14:11 Draghi then warns that inappropriate ‘communication’ has hurt the Greek banking sector for driving up bond yields and lowering the solvency of Greek banks. Draghi: Essential that this solvency is maintained. Some communication undermines this, destroys collateral 2.08pm GMT14:08 The next question is about the €68bn of emergency funding being provided to Greek banks. Draghi replies that the Greek banking system is solvent, and “a lot has been done” to strengthen it. Maintaining that solvency is a key factor allowing the ECB to keep providing that emergency liquidity. 2.05pm GMT14:05 High drama in the press conference, as the last questioner (speaking Greek, I think) tries to respond to Draghi’s last answer. He’s speaking animatedly, and waving his hands, as he takes the ECB president to task. But unfortunately the ECB stopped translating him. Oh dear ... it's all kicking off now ... 2.05pm GMT14:05 The ECB has not changed its mind on Greek debt; it is still refusing to accept it as collateral when making loans to commercial banks. So #Draghi confirms they haven't reinstated waiver for #Greece sovereign debt to be accepted as collateral for refinancing operations. 2.01pm GMT14:01 The next question is about Greece, and why it isn’t included in the new asset purchase programme (due to translation problems I’m afraid I didn’t catch it exactly). Draghi is explaining that the ECB cannot buy the bonds of any country if they’re in a reform programme, so Greek and Cypriot debt are both excluded. He’s also defending the ECB’s role in the Greek crisis, saying it has lent €100bn to Greece, and doubled its lending in the last couple of months. 1.56pm GMT13:56 Draghi: Will not buy bonds yielding below deposit rate 1.56pm GMT13:56 Another question on QE -- could government bond yields fall so far into negative territory that the ECB can’t actually buy them? Draghi replies that people used to warn that eurozone debt levels were very high, now people are worrying that there aren’t enough bonds for us to buy. Fantastic answers by Draghi pointing to inconsistency of critics towards QE, either too small or too big. Similar statements were made when the UK and US started their own programmes, he adds, suggesting he’s not worried. Draghi then states that the ECB could keep buying bonds until the yields fell under the deposit rate (currently -0.2%). Draghi: How negative will we go [on bond purchases]? Until the deposit rate. (explainer: Yields are a measure of the interest rate on a bond. Many eurozone bonds are now trading at a negative yield, meaning they are changing hands for more than their face value) 1.50pm GMT13:50 European Central Bank raises eurozone growth forecast for 2015 to 1.5% from 1%, while cutting 2015 inflation forecast 1.50pm GMT13:50 Is the ECB willing to allow Greece to issue more short-term debt, by raising the current ceiling on T-bill issuances? We are a rule-based institution, Draghi replies, not a political one. And there is a rule that bans monetary financing -- governments printing money to buy their own debt. We are prohibited from doing that. *DRAGHI SAYS ECB CAN'T PRINT MONEY TO BUY GOVERNMENT BONDS The @ECB "not a political institution", says Draghi. Best laugh so far. 1.47pm GMT13:47 Q&A begins Onto questions... What does the ECB mean when it says QE will run until it sees a “sustained” improvement in the inflation path? It means what it says, Draghi replies. We don’t see any reason, now, to change our plan to buy €60bn of securities each month until September 2016, “or beyond if needed” 1.45pm GMT13:45 There is no room for complacency, Draghi adds. Governments must deliver structural reforms quickly and decisively, to underpin confidence and encourage companies to invest. Eurozone governments must keep to their fiscal targets, and fiscal inbalances must be tackled, he concludes. 1.43pm GMT13:43 ECB cuts inflation forecast for 2015 The ECB has cut its inflation forecast for this year, and predicts prices will be flat. It now expects inflation to be 0.0% in 2015, down from 0.7% previously. But it then expects inflation to rise to 1.5% in 2016 (up from 1.3%), and 1.8% in 2017. If they’re right, that means inflation would be back on target: WOW ECB staff 2017 HICP forecast at 1.8% ! That must include nearly all QE effects then. 1.42pm GMT13:42 Draghi is giving a confident vibe: All growth forecasts higher... he sounds like a man who thinks he's done enough 1.40pm GMT13:40 The ECB has raised its growth forecasts. It now expects GDP to rise by 1.5% this year, up from 1.0% previously, followed by faster growth in 2016 and 2017: Upbeat staff forecasts for GDP: 1.5% in 2015 (up from 1.0%), 1.9% in 2016 (up from 1.5%), 2.1% in 2017 (first estimate). 1.38pm GMT13:38 On economic growth... Draghi warns that the recovery will be ‘dampened’ by the slow pace of reforms, and the ongoing balance sheet adjustments. 1.37pm GMT13:37 The recent fall in the oil price should help the eurozone economy, Draghi says, by boosting household spending and cutting firms’ costs. 1.37pm GMT13:37 Draghi argues that the announcement of QE has already helped the eurozone economy. The programme should improve economic growth outlook and reduce economic slack, he adds. 1.34pm GMT13:34 Technical details of the QE programme will be released later today. Draghi: Additional information on implementation of programme to be released at 15:30 CET on ECB homepage 1.34pm GMT13:34 Draghi: QE begins next week Draghi confirms that the ECB left interest rates unchanged at today’s meeting And he then announces that the ECB will begin buying eurozone government bonds on 9th March, under its new QE programme. The programme will be €60bn per month (as announced at the previous meeting in January) And it is expected to run until September 2016, or until the ECB sees that inflation is on a “sustained path” to its target of close to, but below, 2% in the medium term. Updated at 1.35pm GMT 1.30pm GMT13:30 ECB press conference begins Mario Draghi has arrived, and is welcoming reporters to today’s press conference in Cyprus 1.21pm GMT13:21 The ECB’s press conference starts in 10 minutes. It is being streamed live, here. 1.15pm GMT13:15 The ECB chose a nice day to visit Cyprus; it looks rather sunnier than Frankfurt: Press conference venue looking sunnier than usual. pic.twitter.com/huVw8Ig0xt 1.13pm GMT13:13 ECB press conference - a preamble There are a few key themes to watch out for in today’s press conference with Mario Draghi. 1) QE, the details. Investors are looking for details of the ECB’s new asset purchase scheme, which was announced at the last meeting in late January. How does it intend to buy these government bonds, and how will it tell if the programme is working? 2) The ECB will release its new staff forecasts; they are likely to predict higher growth, and lower inflation. So, does Mario Draghi think the eurozone economy is recovering -- and if so, how long might QE be needed? 3) The Greek bailout. The ECB is a member of The Troika , forgive me, one of The Institutions, so Draghi can expect questions on Greece’s four-month bailout extension Will a third programme be needed? He should also be grilled about the ECB’s decision to stop accepting Greek government bonds as collateral. Might that be reversed?.. ...and how long will the ECB maintain emergency liquidity funding for Greece’s banks? 12.54pm GMT12:54 #ECB left rates unchanged as it prepares to start QE program. Main rate remains at 0.05%, depo rate at -0.2%. pic.twitter.com/KP7lZK92MH 12.53pm GMT12:53 Here’s a snap from today’s ECB meeting in Cyprus: Governing Council gathers in Nicosia pic.twitter.com/6dJqhQeokV 12.49pm GMT12:49 So, the ECB’s main refinancing rate remains at 0.05%, the lowest level level. The deposit facility rate remains at -0.2%, so commercial banks will be charged for leaving deposits at the ECB. And the marginal lending rate (paid by banks when they borrow from the ECB) remains at 0.3%. 12.46pm GMT12:46 No change from the ECB Here comes the European Central Bank decision.... and it’s also left its benchmark interest rates unchanged. European Central Bank leaves rates unchanged #ecb #euro Now we wait 45 minutes for the press conference (or slightly longer if the lifts are broken, like last time) 12.44pm GMT12:44 One central bank decision down, one to go.... Next up is the #ECB at 12:45pm with its interest-rate announcement.No change is likely as we will hear about #QE at 1:30 but you never know! 12.44pm GMT12:44 Britain’s small firms are delighted that interest rates remain so low. John Allan, Chairman of the Federation of Small Businesses (FSB), says “The Monetary Policy Committee has made the right decision in maintaining the current interest rate, with inflation at a record low of 0.3% and the risk of long term deflation still present in Europe. “Many of our members plan to grow their businesses in 2015, and low interest rates are giving them confidence to invest in their firms by hiring new staff and increasing wages.” 12.33pm GMT12:33 Jeremy Cook of World First also reckons that UK interest rates could be unchanged until 2016*: “We are coming to the end of this ultra-low interest rate experiment in the UK, although I believe there is the possibility that a year from today, rates will remain at 0.5%. Unemployment is falling healthily, the declines in inflation are temporary and soon to come to an end and growth is becoming increasingly resilient. * - not for another 91 years, as I mistyped earlier (thanks Charles!) @graemewearden I know things are a bit sluggish but this (from the liveblog) seems excessive. pic.twitter.com/Vd5cfJ1UGX 12.15pm GMT12:15 Martin Beck, senior economic advisor to the EY ITEM Club, reckons UK interest rates might not rise until early 2106 2016, because inflation is so far below target. He adds: While the risks of an earlier rate rise have probably increased lately, we still think it most likely that the Bank will wait until February 2016, by which time inflation will be back above 1% and heading towards the 2% target. The MPC may have chalked up six years without raising Bank Rate, but we think it will narrowly avoid making it seven.” Updated at 12.26pm GMT 12.03pm GMT12:03 Economists have consistently failed to predict that UK interest rates would stay this low for so long, analysts at RBS point out. Market expectations for Bank Rate have changed a lot since 2009 & they have consistently been well wide of the mark. pic.twitter.com/Scylaoq9Qh 12.02pm GMT12:02 BOE holds rates for 72nd month in a row. In other news sky still blue, beer still delicious, death still inevitable 12.00pm GMT12:00 Bank of England leaves interest rates unchanged (again) Britain has just entered its seventh year of record low borrowing costs. The Bank of England has voted to leave interest rates at their current record low of 0.5%, where they have been pegged since March 2009. It also made no change to its £375bn asset-purchase scheme (quantitative easing). And there’s no accompanying statement from the BoE either. @BankofEngland maintains #BankRate at 0.5% and the size of the Asset Purchase Programme at £375 billion That’s entirely as expected; economists predict that rates will remain unchanged for several months to come. I’ll pull together some (pre-written?) reaction now... Updated at 12.01pm GMT 11.51am GMT11:51 Just 10 minutes to go until the Bank of England announces its decision on interest rates. Oh the suspense, until analysts at ING ruined it.... ING slightly jumping the gun with its analysis about why the @bankofengland hasn't changed rates/QE today pic.twitter.com/8pv6RQV2Gw At least it wasn’t the finale of House of Cards.. 11.49am GMT11:49 2014 was a good year for Willie Walsh, the boss of British Airways’ parent company IAG. Walsh picked up £6.4m last year, an increase of almost 30% on 2013. That’s *despite* turning down a 2% increase in his basic salary. Leading by example, apparently.... "Once again the CEO led by example in proposing restraint in exec pay" British Airways/IAG remuneration cttee as Willie Walsh gets £6.4m Updated at 11.50am GMT 11.02am GMT11:02 Europe’s stock markets are inching higher ahead of the European Central Bank’s decision on monetary policy, and subsequent press conference. Investors are expecting to hear details of the ECB’s quantitative easing programme, as David Madden of IG explains: Central banks have been the driving force behind the booming stock markets over the past few years and now it is the ECB’s turn to flood the financial system with money. Eurozone equity markets are highly dependent on the stimulus package from the ECB and traders will be looking for Mario Draghi to give the green light signalling the next round of buying. 10.23am GMT10:23 Greek unemployment rate rises to 26% Hopes that Greece’s labour market was recovering have been dented by new data, showing that the seasonally-adjusted unemployment rate rose in December to 26.0%, from 25.9%. Greece’s Unemployment Rate Increases to 26 Percent in December pic.twitter.com/qJVk1HJtPR Elstat reported that the number of employed people dropped by 24,453 during the month, while the number classed as inactive rose by 20,425. The youth unemployment rate (covering 15-24 year olds) was roughly double the headline rate, at 51.2%. Still rising RT @MarkitEconomics Unemployment rate in Greece at +26.0% in December from +25.9% in November 10.10am GMT10:10 Over in Athens the Greek finance ministry has issued a tersely-worded statement denying that the government’s reforms – being fine-tuned ahead of Monday’s meeting of euro area finance ministers – was “discussed” at a preliminary Euro Working Group session on Wednesday. From Athens, Helena Smith reports: “The finance ministry categorically denies reports that the contents of the Greek proposals were discussed during yesterday’s Euro working group,” it said. The statement also rejected reports that teams representing the “institutions” - the EU, ECB and IMF keeping the debt-stricken economy afloat and until recently known as the Troika - had also arrived in Athens. “They are beyond reality,” it said. The statement would seem to indicate the growing nervousness in Athens over the reforms as fears mount of a credit crunch ahead of maturing debt obligations the country now faces. The proposals, if viewed as persuasive, could unlock €7.2bn in aid that Greece has yet to draw down from its initial €240bn bailout program. Much depends on them! 9.52am GMT09:52 Drip, drip, drip... RT "@Efiefthimiou ECB raised ELA for #Greece banks by 500mln euros to 68.8 bln euros vs 68.3bln via @capitalgr" 9.50am GMT09:50 Greek financial website CapitalGR is reporting that Greece’s banks have been given another €500m of emergency liquidity by the ECB. ECB raised ELA for #Greece banks by 500mln euros to 68.8 bln euros vs 68.3bln via @capitalgr Updated at 10.46am GMT 9.22am GMT09:22 Britain’s auto industry has posted its longest ever streak of sales growth. New UK car registrations were 12% higher year-on-year in February, suggesting consumer spending remains robust. New car registrations last month up 12% on year earlier - 36th month of growth, which SMMT says is longest on record. 8.59am GMT08:59 8.57am GMT08:57 Euro hits new 11-year lows Foreign exchange traders have pushed the euro down to its lowest levels since September 2003, ahead of the ECB’s press conference later today. The euro hit $1.1028 in early trading, on anticipation that Mario Draghi will announce details of the eurozone’s new quantitative easing programme. Eurozone sovereign bond yields are also hovering around record lows, pushed down by the prospect that the ECB will start buying government debt. 8.37am GMT08:37 Draghi praises Cyprus over bailout progress Cyprus’s president Nikos Anastasiades will be very happy that ECB president Mario Draghi showered praise on his government last night (flags up our correspondent Helena Smith) In a speech at the presidential palace, Draghi said Cyprus had made “remarkable” progress [a nudge to Greece to crack on with its own reforms?] Dragh said: “It is safe to say that he programme has been yielding very concrete results, in fact even better results that were forecasted two years ago.” The restructuring and recapitalisation of the banking sector has led to a significant improvement in the health of the financial system.... Indeed it is remarkable that Cyprus is on track to exit the excessive deficit procedure two years ahead of the 2016 deadline. All these achievements are impressive and command respect from the rest of Europe.” Updated at 9.32am GMT 8.25am GMT08:25 Fresh data from the Halifax building society suggests Britain’s housing market is cooling. Prices fell by 0.3% month-on-month in February, Halifax says. That means prices are up by 8.3% over the last year, down from 8.5% in January. The Halifax indicate average house prices down last month by 0.3 % #timetosell http://t.co/VYYWhF1RF6 pic.twitter.com/cpHgHiXQKh This kind of monthly data should be treated with caution. Howard Archer of IHS Global Insight reckons activity will ‘pick up modestly’ in the months ahead: Consequently, we expect house prices to rise around 5% in 2015. 8.13am GMT08:13 German industrial orders weaker than forecast Predictions that Germany’s economy is strengthening have taken a knock this morning. German industrial orders shrank by 3.9% in January, compared with December; much worse than the 1.0% decline expected by economists. Although it’s a volatile measure, it may puncture some of the optimism around Germany’s recovery (following blowout retail sales figures on Tuesday). Christian Schulz, senior economist at Berenberg Bank, says (via Reuters): It’s a reminder that Germany’s growth at the moment is driven by consumption and not by the manufacturing backbone of the economy.... Something for the ECB’s governing council to consider at today’s meeting. Updated at 8.16am GMT 8.01am GMT08:01 Cyprus’s finance minister has defended the country’s austerity programme, in an interview with Bloomberg TV: #Cyrpus finance minister Georgiades tells @FerroTV: Our reform and consolidation plan is delivering. #Cyprus finance minister Georgiades tells @FerroTV:We look fwrd to participating fully in the #ECB #QE program which will start now. However, Cyprus is one of only three European economies that shrank last year (along with France and Finland), as it struggles to recover from its chaotic bailout deal in 2013. Updated at 8.12am GMT 7.51am GMT07:51 Photos: ECB faces anti-austerity protests Today’s European Central Bank meeting in Nicosia comes ahead of the two-year anniversary of Cyprus’s bailout deal this month. And thousands of Cypriots gathered outside the meeting last night to demand an end to Cyprus’s austerity programme. They chanted slogans such as “No more austerity and cuts” and “No to troika and its policies, and called for new pro-growth policies to drag Cyprus out of its recession. Associated Press has more details: Some 18 groups organized the event, including left-wing trade unions, teacher and family groups, as well as student organizations. Some protesters carried banners reading, “End to austerity, we want jobs,” and “Save the people, not profits and banks.” Organizers put their demand for growth-oriented policies in a petition addressed to ECB chief Mario Draghi. They say among those attending were French, Greek and Austrian trade unionists as well as European Parliament member Fabio De Masi. Here are more photos from Wednesday night’s protests: Updated at 8.29am GMT 7.43am GMT07:43 The agenda: ECB and Bank of England meetings Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business. It’s Central Bank Thursday, with the European Central Bank and Bank of England both holding their monthly policy meetings. The ECB, gathered in Cyprus this month, is the main event. President Mario Draghi is expected to flesh out the Bank’s quantitative easing plan at the monthly press conference, from 1.30pm GMT. Draghi will also face questioning over Greece’s bailout, given the ECB is keeping its banks afloat with emergency liquidity aid. We should also get new growth and inflation forecasts from the ECB. The Bank of England, meanwhile, is widely expected to leave interest rates on hold again at noon today. That would mean more than six years of record low borrowing costs. To be honest, we’re more interested in the shock news that Britain’s Serious Fraud Office is probing the BoE. As my colleague Heather Stewart reported last night: The Bank of England is facing an unprecedented criminal investigation by the Serious Fraud Office over emergency lending measures it took at the height of the credit crisis to inject cash into financial markets. In late 2007 and early 2008, as the authorities struggled to prevent financial markets from freezing up, banks were invited to bid to borrow funds from the Bank of England, in exchange for collateral, in a series of so-called “auctions”. It is the conduct of these liquidity auctions which is now being investigated by the SFO, which said in a statement it is, “investigating material referred to it by the Bank of England concerning liquidity auctions during the financial crisis in 2007 and 2008”. More here: SFO launches investigation into Bank of England liquidity auctions. And we’ll also be monitoring events in Greece. Finance minister Yanis Varoufakis has denied that Athens will need a third bailout (as his Spanish counterpart claimed yesterday) “There are no preparations for a third credit package and the country does not need it.” Varoufakis: Greece does NOT need a third bailout - http://t.co/zeQ23R1nZb pic.twitter.com/hiPeq9PAvS Updated at 8.06am GMT |