The European Central Bank’s first targeted-loan program came in below estimates in a sign that President Mario Draghi has a way to go to meet his stimulus target.
The Frankfurt-based central bank said it alloted 82.6 billion euros ($106.5 billion) at a fixed interest rate of 0.15 percent in its targeted longer-term refinancing operations today. Estimates in a Bloomberg News survey of economists ranged from 100 billion euros to 300 billion euros, with a median of 150 billion euros.
The lending program is part of a range of ECB measures to stave off deflation in the euro area that Draghi says will boost the institution’s balance sheet to as much as 3 trillion euros from 2 trillion euros. By tying the cheap four-year loans to the size of banks’ loan books, the ECB intends to spur lending to the real economy.
A “low number could support the view that there is a lack of demand and therefore boost market expectations for further easing measures from the ECB to raise inflation,” Morgan Stanley analysts in London led by Hans Redeker, head of global currency strategy, said in a note today before the release. It could mean “quantitative easing possibly being discussed again by market participants.”
Bank Assessment
Morgan Stanley said banks may also prefer to wait for the end of the ECB’s health check of bank balance sheets. The results of the Comprehensive Assessment will be published next month shortly before the central bank becomes euro-area supervisor.
Banco Popular Espanol SA (POP), said it would seek 2.85 billion euros in loans today. Banco Sabadell SA (SAB), Spain’s fifth-biggest bank, didn’t bid for funds and will seek to borrow 5 billion euros in December, according to a person familiar with the information.
The ECB will conduct eight TLTROs through 2016, with the next one scheduled for December, and plans to release details of a program to buy asset-backed securities and covered bonds next month.
Inflation (ECCPEMUY) in the 18-nation euro area was 0.4 percent in August, holding at the weakest pace since 2009 and a fraction of the ECB’s goal of just under 2 percent. Draghi has warned of a deflationary spiral of falling prices and households postponing spending.
To contact the reporter on this story: Stefan Riecher in Frankfurt at sriecher@bloomberg.net
To contact the editors responsible for this story: Emma Charlton at echarlton1@bloomberg.net Paul Gordon, Zoe Schneeweiss
