ECB Placebo; Beige Book: Best of Kass

NEW YORK (TheStreet) -- Doug Kass of Seabreeze Partners is known for his accurate stock market calls and keen insights into the economy, which he shares with RealMoney Pro readers in his daily trading diary.

Among the posts this past week were items on ECB policy and what you should know about the Fed's latest Beige Book report.

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ECB's Placebo Policy Moves On

Originally published on Friday, June 6, at 8:03 a.m. EDT.

On June 5, the European Central Bank launched more aggressive monetary policy moves that are intended to revive European economic growth and to counter the threat of deflation.

  • The repo rate was reduced by 10 basis points, to 0.15%.
  • A negative deposit rate of -0.10% (from 0.00%) was established for banks depositing funds with the ECB, which is intended to provide an incentive for banks to lend.
  • A new facility was established to provide up to 400 billion euros for banks to lend in the nonfinancial private sector.
  • The sterilization of bond purchases (made at the beginning of the euro crisis) will be suspended.
  • The ECB will begin to develop a plan to make purchases of asset-backed securities.

The current rate of inflation in the eurozone is a low +0.5%. Europe's economic recovery remains uneven. The May eurozone purchasing manager index for manufacturing moved lower to 52.2 from 53.4 in April. The composite PMI, which includes services and manufacturing, also declined in May from 54.0 to 53.5. The euro remains at about 1.36, and although down modestly from the previous ECB meeting, is still remains too high (according to many observers).

[Read: ECB Cuts Key Interest Rates Amid Deflation Worries]

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