ECB Stealthly Approaches Zero Rates

I have already mentioned a couple of times last year that Trichet is no political courage and that he had abdicated from its duties which are very simple as they fit in one single statement: protect the value of the €. He has one task, and he has yet managed to miserably fail.

So basically, this is the third episode to this series, the first two ones being:
So basically Trichet has an issue: he cannot simply stick to his own words. Every time he says something, he does the opposite a few weeks later. He has constantly said that he won't decrease rates, yet he has actually decreased them substantially for the past several months. But here is the final straw:
March 12 (Bloomberg) -- European Central Bank President Jean-Claude Trichet’s new weapon to battle the recession is taking him closer than it seems to zero interest rates.

Trichet is allowing the ECB’s deposit rate, which lenders earn on overnight deposits with the central bank, to usurp the benchmark refinancing rate and become the main driver of short- term borrowing costs. At just 0.5 percent, the deposit rate matches the Bank of England’s key setting and is only a step away from the zero-to-0.25-percent range the Federal Reserve uses.
[...] The deposit rate is “very, very low,” Trichet said three times in an hour at a press conference on March 5.

The ECB’s decision to offer banks unlimited amounts of cash, announced on Oct. 8, has culminated in the deposit rate setting the new de facto cost of short-term money. The measure removed the need for banks to borrow in the money market to meet their reserve requirements.
Trichet hasn’t ruled out further rate cuts. The ECB has “not decided ex-ante that the present level was the lowest,” he said during a press conference in Vienna today. Still, “we are at very low rates.”
The ECB has cut its main refinancing rate by a total of 2.75 percentage points since early October.
That is allowing Trichet to argue “that the ECB does not have such a different monetary-policy stance from the Fed and Bank of England,” said Gilles Moec, an economist at Bank of America Merrill Lynch in London.

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