Trial now

Bear Leg Extends




August Economic Activity Rises 1.1% M/m


Uptrend Remains Intact

  • In the past cycle, investors have been constantly questioning if the ECB will be able to normalize its policy rate in the future after nearly 11 years of ZIRP/NIRP policy combined with significant liquidity injections.
  • The last time the ECB tried to raise rates was in 2011 (the 'Two Trichet Hikes'), which some economists have described as the 'Big Mistake' as it probably sharply worsened the Eurozone crisis.
  • Economists and financial historians have often talked about the 'Japanification of Europe', where Europe had been showing similar symptoms as Japan did a decade earlier in the last 1990s (rising debt, aging demographics...).
  • This chart shows that Japan 3M Libor interbank market has historically led Euro 3M Libor by 17 years.
  • Since interest rates reached the zero bound in early 2000, the BoJ has never been able to normalize its policy rate and has constantly increased the size of its balance sheet in order to counter the deflationary forces.
  • Will it be different for the Eurozone and the ECB?

Source: FRED/MNI

MNI London Bureau | +44 203-865-3850 |
MNI London Bureau | +44 203-865-3850 |