JPM says ECB should have negative interest rate of -0.75%

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Economists say that a complete exit from the crisis will take longer than expected because policy isn’t easy enough.

In the client note they also says that the rate may be 250bps too high as the equilibrium neutral policy rate is probably lower now vs last cycle.

They growth as “lacklustre” and inflation well below the ECB target due to the ECB’s tight monetary stance “as far as the eye can see” and a reluctance to engage in it’s own QE.

They expect political and social stress of fiscal adjustment to be the catalyst for any “second act” of the crisis.

Are you listening Mr Draghi?


Author: Ryan Littlestone

Ryan Littlestone has been working in financial markets for more than 20 years. Wide-eyed, he stepped out of Bank station in London to join LME founding member Rudolf Wolff where he worked his way to the main order desk and brokered customer orders to the LME floor and across virtually every global market. An opportunity to help set up and run a new LIFFE floor operation saw him catch the trading bug and it wasn’t long before the pull of the pits was too great to refuse. He became a ‘local’ and has been trading his own account for more than 11 years.


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Ryan Littlestone


  1. Mr Draghi is not taking any advice from anyone besides Frau Merkel. And she is insisting that euro should be strong. It is in Germany’s interests, so she does not give a shit that rest of Europe is suffering.

  2. @ Indrek:
    Why would it be in Germany’s intrest to have a strong € ?

  3. If we keep trying to use the ‘cost’ of money to determine the quantity of money via ‘policy’, then we will do well to understand our position within Fisher’s Debt-deflation Theory of Great Depressions.
    If a minus .25 percent is ‘rational’ in light of a lack of recovery, then exactly how low can we go?
    Anybody else see destabilization arising as we sink deeper into that debt cycle?
    The clear solution is being offered by former head of the UK’s Financial Servies Authority Lord Adair Turner.
    In his paper on how to achieve a new debt-free money available from Volcker’s Group of Thirty, he explains the need to divorce the money supply from the debt industry.
    The reason that less-than-zero cost of money sounds implausible is because it is a sign that the the debt-based system of money is broke, broken and insolvent.
    Thus, implausible.


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