Source: CCTV Finance
The global interest rate cut is getting worse and worse!
At 19:45 pm on September 12, Beijing time, the European Central Bank announced that it would lower the deposit interest rate by 10 basis points from -0.4% to -0.5%; at the same time restart QE (quantitative easing policy). After the news of
was released, the euro-dollar exchange rate plunged , the US dollar index rose above the 99 mark, the gold and silver prices in New York rose together, major European stock indexes rose collectively, and US stocks also rose across the board at the opening, but then fell significantly. At the same time, many institutions have called on the Fed, hoping that the Fed will cut interest rates at next week's interest rate meeting.
△CCTV Finance's "First Time" column video
ECB: "Rate cut + restart QE" two-pronged approach
ECB announced the interest rate policy resolution as scheduled on September 12, announcing the reduction of the euro zone overnight deposit interest rate to -0.5%, while maintaining the euro zone dominant interest rate at zero and the overnight loan interest rate at 0.25%. This is the first time the European Central Bank has cut key euro zone interest rates since March 2016.
At the same time, the European Central Bank changed its interest rate policy guidelines and announced the restart of QE (quantitative easing policy), and will purchase 20 billion euro bonds every month starting from November 1. Investment in maturing bonds will last for 2-3 years.
European Central Bank President Draghi said on the same day that through new loose policies, the European Central Bank has increased monetary stimulus to the euro zone to support the economic expansion of the euro zone.
The ECB issued a loose monetary policy in line with expectations
0 The ECB announced a series of decisions such as rate cuts and restarting QE, which did not have much surprise for market analysts and investors.
html In August, the overall inflation rate in the euro zone fell by 10 basis points to 1%, gradually moving away from the European Central Bank's target of 2%. The market has long generally believed that the European Central Bank was imminent to save the troubled euro zone economy and needed to curb the danger of falling inflation expectations in a timely manner.Many asset management companies, such as JPMorgan Chase and Lazade, have expressed their support for Draghi's call on the government to increase government spending, and believe that the European Central Bank has done its job well, and now should be the time for the European government to take action.
In addition, global foreign exchange trader Futuo Forex (FXTM) believes that the European Central Bank still has reservations to deal with risks such as Brexit and the US imposing tariffs on European goods, and predicts that monetary policy may still be further relaxed this year.
For the banking industry, the decision to negative interest rates has made them feel a headache. Although the interest rate rating system can relieve some of the pressure, the future prospects are still unclear.
In addition, the ECB will welcome the new president Lagarde in more than a month. After the new official takes office, we still need to pay close attention to what changes and new plans the ECB will have.
shakes global financial markets
Since the last ECB meeting in July, the euro has been weakening due to Draghi's suggestion of interest rate cuts. After the news of the European Central Bank's "rate cut + restarting QE" came out, there were obvious abnormal movements in the global financial market.
On the evening of September 12, Beijing time, the euro and the US dollar exchange rate "dived", falling rapidly from 1.1027 to below 1.10, falling more than 70 points at one point. Major European stock indexes collectively rose in the short term and then fluctuated in a narrow range.
US stocks opened higher, with Dow Jones Industrial Average , S&P 500 and Nasdaq index rising 0.30%, 0.26%, and 0.45% respectively. Subsequently, the Dow Jones Industrial Average and the S&P 500 fell significantly, and the Dow Jones Industrial Average turned down, and the S&P 500 almost gave up the gains.
USD index rose strongly, breaking through the 99 mark.
New York Commodity Exchange COMEX gold futures price rose sharply in the short term, once standing above the $1,520/oz mark; New York Commodity Exchange COMEX silver futures price followed the rise in gold prices.
International oil prices fell in the short term and then rebounded. The NYMEX crude oil futures price on the New York Mercantile Exchange fell by nearly 2% at one time, and ICE Brent Oil fell by 2.10%.
Market bets the Federal Reserve cut interest rates next week
ECB has cut interest rates as scheduled, and the market will turn to focus on the upcoming interest rate meeting for the Federal Reserve in September next week (September 17-September 18 Eastern Time). The market generally expects that the Federal Reserve will cut interest rates by 25 basis points at next week's interest rate meeting.
The reason why the Fed's interest rate cut next week is that the US economy is sending recession signals - the US ISM manufacturing purchasing managers index fell for the fifth consecutive month in August, falling to 49.1, the first time in three years, which means that local manufacturing activity is shrinking.
The New York Fed's monthly survey on household consumption in the United States in August showed that the expected inflation rate in the United States will drop to 2.4% in the next year - the lowest level in six years; an indicator to monitor the performance of longer-term inflation - the median expected inflation rate in the United States in the next three years also fell to its lowest point since May 2017 by 2.5%.
UBS Wealth Management recently released a report saying that it is expected that the US economic data will deteriorate from the first quarter of next year, so the Federal Reserve will take intensive actions. Regarding the Federal Reserve's only cut interest rates by 25 basis points in July, UBS Wealth Management believes that it is not enough and it is necessary to lower another 25 basis points this month; it is expected to cut interest rates in March, May, June and September next year, with one rate cut of 50 basis points, that is, a total of 150 basis points will be achieved in the next five interest rates. This means that the target cap on the U.S. federal funds rate will drop to 1% in the third quarter of next year.
Deutsche Bank recently also stated that it is expected that the Federal Reserve will cut interest rates by 25 basis points each time at the monetary policy meetings in September, October, December and next January.
In addition, US President Trump once again called on the Fed to cut interest rates significantly. He said the federal funds benchmark interest rate should be reduced to "zero or below zero."
Source: China Securities Journal (ID:xhszzb), CCTV Finance (ID:cctvyscj)
