{"id":14788,"date":"2015-11-25T08:41:39","date_gmt":"2015-11-25T13:41:39","guid":{"rendered":"http:\/\/olduvai.ca\/?p=14788"},"modified":"2015-11-25T08:41:39","modified_gmt":"2015-11-25T13:41:39","slug":"did-mario-draghi-just-leak-the-bazooka-two-tiered-nirp-system-may-presage-big-rate-cut","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=14788","title":{"rendered":"Did Mario Draghi Just Leak The Bazooka? Two-Tiered NIRP System May Presage Big Rate Cut"},"content":{"rendered":"<h3 class=\"title\"><a href=\"http:\/\/www.zerohedge.com\/news\/2015-11-25\/did-mario-draghi-just-leak-bazooka-two-tiered-nirp-system-may-presage-big-rate-cut\" target=\"_blank\">Did Mario Draghi Just Leak The Bazooka? Two-Tiered NIRP System May Presage Big Rate Cut<\/a><\/h3>\n<p>Back in September (and on several subsequent occasions), we\u00a0<a href=\"http:\/\/www.zerohedge.com\/news\/2015-09-17\/how-mario-draghi-can-force-swiss-national-bank-go-nuclear-depositors\">discussed the implications<\/a>\u00a0of a further cut to the ECB\u2019s depo rate. A plunge further into NIRP-dom would have serious consequences for the Riksbank, the SNB, the Nationalbank, and the Norges Bank.<\/p>\n<p>In world dominated by beggar-thy-neighbor monetary policy, one cut begets another in race to the bottom as everyone scrambles to, i) keep their currency from soaring and ii) keep the inflationary impulse alive.<\/p>\n<p>As Barclays explained in great detail several months ago, another ECB depo rate cut would have an outsized effect of the franc:<\/p>\n<blockquote><p><em>A cut in the ECB\u2019s deposit rate further into negative territory likely would have a significant impact on the EURCHF exchange rate and provoke a more immediate response from the SNB. Indeed, we expect that a cut in the ECB\u2019s deposit rate may have a greater effect on EURCHF than on other EUR crosses.\u00a0<strong>Switzerland applies its negative deposit rate to only a fraction of reserves, currently about 1\/3rd of sight deposits by our calculation.<\/strong>\u00a0In contrast, negative deposit rates apply to all reserves held at the ECB, Riksbank and Denmark\u2019s Nationalbank.\u00a0<strong>Consequently, a cut to the ECB\u2019s deposit rate likely has a larger impact both on the economy and on the exchange rate than a proportionate cut by the SNB.\u00a0<\/strong><\/em><\/p>\n<p><a href=\"http:\/\/www.zerohedge.com\/sites\/default\/files\/images\/user92183\/imageroot\/2015\/09\/NuclearOption.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/www.zerohedge.com\/sites\/default\/files\/images\/user92183\/imageroot\/2015\/09\/NuclearOption_0.png\" alt=\"\" width=\"600\" height=\"278\" \/><\/a><\/p><\/blockquote>\n<p>Now, it appears\u00a0<strong>Mario Draghi may be about to go the Swiss route by introducing a tiered system for the application of negative rates.<\/strong>\u00a0As\u00a0<a href=\"http:\/\/uk.reuters.com\/article\/2015\/11\/25\/uk-ecb-policy-meeting-idUKKBN0TE0T220151125\">Reuters reports<\/a>, \u201cEuro zone central bank officials are considering options such as whether to stagger charges on banks hoarding cash ahead of the next European Central Bank meeting, according to officials.\u201d<\/p>\n<p>\u201cOfficials are discussing a split-level rate,\u201d Reuters goes on to note, adding that the\u00a0<strong>\u201ccontested step would impose a higher charge on banks depending on the amount of cash they deposit with the ECB.\u201d<\/strong><\/p>\n<p>&#8230;click on the above link to read the rest of the article&#8230;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Did Mario Draghi Just Leak The Bazooka? Two-Tiered NIRP System May Presage Big Rate Cut Back in September (and on several subsequent occasions), we\u00a0discussed the implications\u00a0of a further cut to the ECB\u2019s depo rate. A plunge further into NIRP-dom would have serious consequences for the Riksbank, the SNB, the Nationalbank, and the Norges Bank. In [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[2086,1838,124,4333,233,281,282,430,1421,1044,534,1768,1389,6559,8019,683,10142,775,4318],"class_list":["post-14788","post","type-post","status-publish","format-standard","hentry","category-economics","tag-bank-run","tag-barclays","tag-central-banks","tag-crude","tag-ecb","tag-europe","tag-european-central-bank","tag-interest-rate","tag-libor","tag-mario-draghi","tag-monetary-policy","tag-negative-interest-rate-policy","tag-nirp","tag-non-performing-loans","tag-norges-bank","tag-reuters","tag-swiss-banks","tag-switzerland","tag-zerohedge"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/14788","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=14788"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/14788\/revisions"}],"predecessor-version":[{"id":14789,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/14788\/revisions\/14789"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=14788"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=14788"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=14788"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}