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Investors weren’t exactly happy with the European Central Bank’s 25 bps rate cut this morning.Even though it was better than nothing, the rate cut was widely expected and there was a lack of non-standard policy. Ultimately, sentiment seems to be that it doesn’t really go far in helping out EU leaders’ attempts to mitigate the euro crisis.
Lombard Street Research’s Dario Perkins sums up the post-ECB decision angst in markets in one stinging paragraph:
Other than doing nothing (their recent strategy) or actually raising rates (on past form not unthinkable), it’s hard to see how the ECB could have provided any less support at today’s meeting. The 25bps cut in interest rates (to 0.75%) is at least a month late – after all, that is when the latest deterioration in euro-area data occurred. In addition to waiting for clarity in Greece, it appears some ECB members wanted this trivial move to be a reward for politicians ‘doing the right thing’ at their recent summit. If that’s the case, it’s a silly, highly political way to run monetary policy.
Perkins elaborated on the day’s central bank actions, which included moves from the Bank of England (more QE) and the People’s Bank of China (rate cut).
OK, so two paragraphs:
Markets liked today’s central bank moves because they appeared ‘co-ordinated’. But that seems to be true only in the sense of their timing. For the global economic outlook to genuinely improve, a much deeper sense of shared responsibility is required. That is most obvious within the euro area, but it is also true at the global level.