ECB rate cuts won't fix Greece

The European Central Bank may cut rates in October

Petros Giannakouris/AP
Flags from right, Greek, National Bank of Greece and the European Union flags wave outside the headquarters of the National Bank of Greece in Athens.

Let's be clear, a short-term rate cut will not put the Grecian Humptyos Dumptyos back together again but it certainly will make some shorts uncomfortable. People are asking me what I mean by "in crashy markets, deus ex machina is the norm, not the exception." This is what I mean...

From Bloomberg:

The European Central Bank may step up efforts to boost growth and ease financial-market tensions as early as next month, Governing Council members said.

Austria’s Ewald Nowotny and Belgium’s Luc Coene said in Washington that potential measures include the reintroduction of 12-month loans to banks. Asked if an interest-rate cut is warranted, Coene said while that wouldn’t help to bring down longer-term borrowing costs, “the ECB has never ruled out things beforehand.”

“If the data in early October shows that things are worse than we anticipated we will look at the kind of decisions we have to take for that,” he said in an interview late yesterday.

The ECB Council next convenes on October 6th. But they may not wait quite that long with the way asset markets acted this week.

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