WEBVTT - Fels: ECB needs to ease more

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<v Speaker 1>c m E Group US DOCK Index futures are higher.

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<v Speaker 1>They did a trim a rally as European Central Bank

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<v Speaker 1>President Mario Draggy said he doesn't anticipate more rate cuts,

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<v Speaker 1>though risk to the Euro Area growth outlook remained to

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<v Speaker 1>the downside. He we do check the markets every fifteen

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<v Speaker 1>minutes throughout the trading day. On Bloomberg at SNP even

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<v Speaker 1>the future is still up nine and a half points,

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<v Speaker 1>DOWI Mini futures up sixties seven and nas doctumni futures

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<v Speaker 1>up twenty six. The acts in Germany's up one per

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<v Speaker 1>set ten, your treasury down nine thirty seconds, the yield

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<v Speaker 1>one point nine zero per set, Nimax screwed oil down

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<v Speaker 1>to ten percent or nine cents to thirty eight twenty

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<v Speaker 1>A barrel Comax gold is up three town for sunder

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<v Speaker 1>three dollars seventy cents to twelve announced, and the euro

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<v Speaker 1>now at a dollar ten forty one, the yen one

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<v Speaker 1>thirteen point seven nine. That's a Bloomberg business flash, Tom

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<v Speaker 1>and Mike Karen Moscow, thank you very much. Well, here's

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<v Speaker 1>where we are. The European Central Bank today cutting all

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<v Speaker 1>three of its rates, the main refinance rate to zero,

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<v Speaker 1>the deposit rate to negative forty basis points. They increased

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<v Speaker 1>q E by twenty billion euros a month, and they

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<v Speaker 1>announced a new program of loans two banks, essentially letting

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<v Speaker 1>banks borrow money for free, or ECB may actually pay

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<v Speaker 1>them to take money to try to lend it out.

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<v Speaker 1>Since we've been gone, Mario Joggy has been taking more questions.

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<v Speaker 1>He says the ECB expects substantially easier financing conditions because

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<v Speaker 1>of this. There are very strong synergies, Draggy says, between

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<v Speaker 1>all parts of synergy package synergies, and interestingly, he says

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<v Speaker 1>that there was no, uh, no real argument against taking

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<v Speaker 1>the actions. He notes that uh the voting rotation had

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<v Speaker 1>no impact on the discussions. YenS Widman from the hawkish

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<v Speaker 1>Bundesbank was not a voter this time, but Raggy says

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<v Speaker 1>the overwhelming majority were in favor of the decisions. Today's outcome,

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<v Speaker 1>he says, discout doubts about their willingness to act. It

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<v Speaker 1>has been a most interesting day. Nice summary, Michael, Olivia

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<v Speaker 1>Blanchard with US and now Yacom Fells of Pimco, Yacom Fells.

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<v Speaker 1>When you look at this historical moment, I go back

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<v Speaker 1>to Olivia Blanchard and the courage he had to say

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<v Speaker 1>we must reflate and reflate now four percent was the

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<v Speaker 1>operative number. We are miles from that. Is there still

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<v Speaker 1>an appropriate now or immediate future to reflating? Can Mario

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<v Speaker 1>Draggy affect what Olivia Blanchard tried to suggest four and

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<v Speaker 1>five years ago. Well, at least he's trying his best. Um.

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<v Speaker 1>I think, you know the power of monetary policy to

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<v Speaker 1>reflate is obviously limited. They're all kinds of headwinds, falling

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<v Speaker 1>inflation expectations, a very difficult global environment. Uh. And I

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<v Speaker 1>think what we need eventually is support from fiscal policy.

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<v Speaker 1>So I think Mario drug is doing the best he

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<v Speaker 1>can and he made a big step today. But in

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<v Speaker 1>the end, if you really want to see successful reflation

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<v Speaker 1>over the next few years, we need more support from

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<v Speaker 1>governments from fiscal policy. There are some encouraging signs on

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<v Speaker 1>that front. Uh fiscal policy for the first time in

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<v Speaker 1>many years, is now becoming supportive in the US, in

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<v Speaker 1>Japan and also in Europe. But I think more should

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<v Speaker 1>be done. Well, all central bankers seem to feel that way,

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<v Speaker 1>but we're not getting there. So I wonder Mario said

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<v Speaker 1>today they can go lower if they need to, but

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<v Speaker 1>how much lower can they go? In other words, has

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<v Speaker 1>he's throwing the kitchen sink at it? Does he have

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<v Speaker 1>my more left? Well? I think central bankers are slightly

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<v Speaker 1>moving away from the idea that they will push interest

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<v Speaker 1>rates ever more negative. I think the reaction the negative,

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<v Speaker 1>the adverse reaction of bank stocks at equity markets and

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<v Speaker 1>markets more broadly to the Bank of japan announcement of

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<v Speaker 1>negative interest rates, I think it has led to some rethinking.

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<v Speaker 1>So the focus, and we see this in today's decision.

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<v Speaker 1>The focus is now again much more on credit easing,

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<v Speaker 1>supporting the banks and also importantly venturing into buying private

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<v Speaker 1>sector assets. So this was a big step from the

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<v Speaker 1>ECB today announcing that they buy corporate bonds. Are they

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<v Speaker 1>going to compete with Pimco, with Scott Mather's corporate desk

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<v Speaker 1>to buy corporate paper in Europe? When you want to

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<v Speaker 1>buy a Siemens piece, Are you going to compete with Frankfurt? Well,

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<v Speaker 1>I think they will compete with private investor does yes.

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<v Speaker 1>My expectation would be that they won't buy huge amounts.

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<v Speaker 1>I think this is not so much about quantity. It's

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<v Speaker 1>more about sending a signal that they are willing to

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<v Speaker 1>buy private sector assets. And I just view it as

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<v Speaker 1>a first step if needed eventually, if if more is needed,

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<v Speaker 1>I think eventually the e CP could even venture into

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<v Speaker 1>buying equities, and so I just view this announcement of

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<v Speaker 1>buying corporate bonds as one step in that direction. You

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<v Speaker 1>can do much bigger quantities on equities than you can

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<v Speaker 1>do on corporate bonds. Uh. The question raised about that though,

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<v Speaker 1>and tomorrow Dargues says there will be a committee that

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<v Speaker 1>will decide which corporate bonds to buy. More details will

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<v Speaker 1>be announced later this afternoon in Frankfort. But is there

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<v Speaker 1>a risk that credit allocation becomes the e c B

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<v Speaker 1>s JAB. Yeah, I think you can put it this way.

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<v Speaker 1>I wouldn't. I wouldn't say it's a risk. I think

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<v Speaker 1>if you go back in history and the old days,

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<v Speaker 1>in the really old days, central banks were lending to

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<v Speaker 1>the private sector, they were discounting trade bills. Um. So

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<v Speaker 1>this is just going back to the roots where the

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<v Speaker 1>central banks also lent to the private sector. And part

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<v Speaker 1>of the reason for this is that the banks, for

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<v Speaker 1>various reasons, are not really doing it. What will this

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<v Speaker 1>do to the currency? And I know it's called the

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<v Speaker 1>litmus paper of the system. Does this reaffirm not the

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<v Speaker 1>drama of a currency war. Does it reaffirm stronger dollar,

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<v Speaker 1>weaker everything else? I'm not so sure about this. I

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<v Speaker 1>think we have opened a new chapter. So this is

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<v Speaker 1>not so much. Today's move was not so much about

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<v Speaker 1>pushing the currency lower, and I think the FX market

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<v Speaker 1>got the message. We had to reverse it initially the

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<v Speaker 1>euro weekend, but now it is stronger on the day,

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<v Speaker 1>and I think this is because the market understands that

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<v Speaker 1>the ECBs focus is now on addit easy, it is

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<v Speaker 1>on supporting the banks, it's on supporting the corporate sector,

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<v Speaker 1>the private sector, and so you could argue that this

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<v Speaker 1>is actually euro supportive. So so in a way, I

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<v Speaker 1>think we're now in a new environment where it's no

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<v Speaker 1>longer about currency wars. This is much more about focusing

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<v Speaker 1>on easing domestic monetary conditions. Com Pels from PIMCO, thank

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<v Speaker 1>you for joining us today, on this day when the

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<v Speaker 1>ECB has it's in the words of it. I didn't

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<v Speaker 1>say this words of many people throwing the kitchen sink

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<v Speaker 1>at the economy in Europetown. Is this fun? Oliva and Chard,

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<v Speaker 1>Brendan brown Yakham Fells. That's pretty good. Stay with U

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