The ECB has forewarned of a reduction in their rate by possibly .25% but if they do drop the rate will it help the financial tug-o-war in Europe?
Considering the $one trillion lent via the LTRO at 1% could the reduction in the cost of funds create more liquidity between financial institutions?
On one hand you'd believe that with so much money around making it fractionally cheaper wouldn't do much and that is highly possible.
The ECB is embracing the ZIRP club's mentality and by so doing is proving just how desperate things look from the ECB view.
But even if money was lent at zero% to the spending public the take up would shrivel up as their desperation increases.
It's typical of a Central Banker thinking always in terms of percentages but the EZ public and those institutions struggling with ugly balance sheets may see nothing in cheaper rates.
It hasn't worked in the US or Japan. Perhaps the EZ is different.
