Death Star Economics



Collective central banking day

The Bank of England has just announced to inject another £50bn into the economy, driven by sluggish growth and poor output figures. Importantly, there is no word about this being the last tranche of QE either. The Bank’s main interest rate is being kept at 0.5%.

Meanwhile (literally at the same time), the People’s Bank of Chinacut both its benchmark interest and deposit ratesread article

The third central-bank-rate announcement of the day comes from the ECB, which cut all rates there are – most importantly it’s deposit interest rate, previously sitting at 0.25%. Exactly, and now it’s at 0%.

Mario Draghi, head of the Bank will hold a press conference after the announcement, at which he is expected to discuss the future of the EFSF bond buying program. That could put more pressure on the ratification process of the ESM throughout Europe. As a reminder, the Germans pulled the case in front of their supreme court, while the Dutch and Finish said they would veto the ESM’s proposed use.

But back to the Bank of England for a second… Despite Barclays‘ attempt to entangle the Bank in LIEborgate, the government has been little impressed. Instead, George Osborne is blaming the opposition, the Labour Party, mostly because it’s tradition or maybe because it sounds alike… Moody’s downgraded Barclays simultaneously, due to “senior resignations at the bank and consequent uncertainty.” Interesting way to put it.

In other news, it will only be a matter of weeks before Porsche will be a wholly-owned subsidiary of Volkswagen. The $5.6bn merger that will cost Porsche at least a little bit of its cool will be completed by August 1. Volkswagen’s purchase of 50.1% of the remaining stock, however, isn’t a takeover, but a restructuring of Porsche, which is important because it avoids any tax payments on the transaction. Moreover, Porsche’s earnings will offset the purchase price, and around €2bn of VW’s money is going to flow towards Porsche’s liabilities, returning the company from the red to the blackread article

Otherwise, Greek prime minister Antonis Samaras is meeting troika officials this afternoon to kick off the painful renegotiation of bailout terms.

So long.


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