No, Rate Cuts Were Not Discussed: ECB Insiders Out Draghi as Fabricator & Schemer, and Talk to Reuters

Draghi’s shenanigans get hilarious, months before his term ends.

So here’s ECB President Mario Draghi, whose term ends in October, and he’s at the ECB Forum in Portugal, and in a speech on Tuesday titled innocuously, “Twenty Years of the ECB’s monetary policy” – so this wasn’t a press conference after an ECB policy meeting or anything, but a speech on history at an ECB Forum – he suddenly threw out a whole bunch of stuff…

How, “in the absence of improvement” of inflation, “additional stimulus will be required,” in form of “further cuts in policy interest rates” and additional bond purchases, and how “in the coming weeks, the Governing Council will deliberate how our instruments can be adapted commensurate to the severity of the risk to price stability,” and that “all these options were raised and discussed at our last meeting.”

Whoa! Wait a minute, said the good folks who were part of the ECB’s June meeting. These options were not discussed, they told Reuters on Tuesday.

Draghi had ventured out there on his own – apparently trying to push his colleagues into a corner single-handedly as his last hurrah.

His vision laid out on Tuesday was quite a change from the June 6 post-meeting announcement, which didn’t mention anything about even discussing rate cuts. It said that the ECB expects its policy rates to “remain at their present levels at least through the first half of 2020,” before the ECB would begin to raise them, with the bias still on raising rates, not cutting rates. That was less than two weeks ago, and there had not been another ECB policy meeting since then.

Interviewing six “sources” at the ECB with “direct knowledge of the situation,” Reuters found that these policy makers “had not expected such a strong message and that there was no consensus on the path ahead.”

At the June 6 policy meeting, any possibility of a rate cut or renewed asset purchases had been mentioned “only in passing” and without any substantive discussion. The discussion had instead focused on the new package of loans for the banks, the sources said.

The sources told Reuters that ECB policymakers were worried “Draghi was flagging his measures so strongly to markets as a ‘fait accompli’ that there would be no chance for them to disagree with them in at the next policy meeting on July 25,” Reuters reported.

“But they added that, with a global trade war escalating and financial worries around Italy already high, there was little appetite for a fight in July,” Reuters said.

Several sources told Reuters that, because very little new economic information on the Eurozone will come out before the July 25 meeting, “it would be difficult to justify coming to a different policy conclusion than in June.”

And at the June meeting, the conclusion was to delay rate hikes – and there was no mention of rate cuts.

The sources told Reuters that the debate about which policy measures to implement, when, and in what order was still wide open, with policy makers having very different opinions.

For some the first step should be a change in the ECB’s policy message. Others favor a reinforcement of the pledge not to raise rates for a longer time.

Others favor restarting the asset purchase program to bring borrowing costs down for governments so that they could spend more during a downturn, though that would be handicapped by the “issuer limit” that prevents the ECB from holding more than 30% of a country’s sovereign bonds. But the ECB could dispose or circumvent that limit, “some” sources said.

Some policymakers lean toward rate cuts, the sources said. And other policymakers think the ECB should not make any changes at all unless economic data deteriorated substantially and inflation expectations dropped further below the ECB’s target.

But there was no consensus, and there had been no substantive discussions of these topics at the last meeting that had focused on the modalities of the new bank loan package.

What is hilarious is how Draghi was outed as a fabricator and schemer on the very same day he made his additional-stimulus-will-be-required speech, by people who were surprised by his speech, some of whom felt “powerless,” as Reuters put it, and knew he was trying to box them into a corner with his devious move. This has the smell of a palace revolt at the ECB against the head honcho and his last hurrah.

The benefit of NIRP: There’s hell to pay – even the ECB admits it. Read...  Inspired by Deutsche Bank Death Spiral, European Banks Sink to Dec 24, 2018 Level – First Seen in 1995

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  58 comments for “No, Rate Cuts Were Not Discussed: ECB Insiders Out Draghi as Fabricator & Schemer, and Talk to Reuters

  1. Sandu says:

    Currency wars? Was it possible that he is also trying to drag the FED towards (or give it more ammunition for) a faster more accommodative stance? The timing is a bit suspicious too – just a day before Fed’s meeting…

    • MC01 says:

      Draghi’s fast talking has nothing to do with the Fed.
      He was using an official ECB event (their ongoing forum in Sintra) to try and armwrestle the ECB board of directors into compliance. He has a long record of trying to manipulate them this way, by presenting his own ideas as a fait accompli, and an even longer record of jawboning financial markets with private statements masked as official ECB policy.

      Draghi has made a lot of powerful enemies by behaving like he has over the years, but the blame is on those same ECB directors and especially the European Council who allowed him to do more or less as he pleased instead of giving him a well-deserved dressdown.
      Let’s see if they learned their lessons.

      • Standards says:

        Manipulating groups of people by making media statements (I never understood how leaders had the time to get to know journalists names and the minute the leader does know them, the journalist will challenge less, cover up more mistakes and basically compromise the role of journalism which is to hold power to account) using the power actor’s own personal opinion as a foregone conclusion or a fait accompli is … standard practice in the UK Government politicians manual.

        • MC01 says:

          There’s no need to go all the way to the top of the government. Just grab a local newspaper.
          Tuesday issue: “Our beautiful country is being destroyed by concrete, warns citizens’ committee”.
          Wednesday issue: “New real estate development announced. This one will be big!”
          Thursday issue: “Citizens who warned about real estate speculation challenge mayor who greenlighted it to a public meeting”.
          Friday issue: “Our hallowed mayor who can do no wrong says this high quality development has nothing to do with speculation and is all about high quality real estate”. Proskynesis (an exaggerated form of kneeling to signal complete submission for those who didn’t study Classic Greek) in front of said concrete-loving mayor is optional but appreciated.
          It has been this way all my life. ;-)

        • suny 129 says:

          There is no longer the good ole ‘investigative’ journalism, just ACCESS journalism. Never ask tough questions b/c you may not be invited to next press conference or the x-mas party!

          As they the PRESS has become the ‘ presstitute’ populated with multi millions earning ‘whoresspondents!

          No wonder, I rely on Wolf’s street blog!

      • Cynic says:

        Can Draghi really be such a loose cannon, though?

        If he has influential enemies, surely there must be an equally influential segment of the Establishment which is quite pleased by his policies.

        Otherwise he would have been disciplined – easy enough to do, there is dirt on everyone to be deployed, when required.

        • Javert Chip says:

          You are assuming EU bureaucrats have backbones; no such facts are in evidence.

          The EU looks like a huge player on the global scene, with a population 512.3M and GDP of $18.8T…


          the EU is 28 semi-sovereign nations with an average population of 18.3M and average GDP of $671B (not Trillion). EU leaders (NONE OF WHICH ARE DIRECTLY ELECTED FOR EU LEADERSHIP POSTS) come from these tiny countries; most end up way over their head (Junckers, President of EU, is from Luxembourg, population 591thousand)

        • MC01 says:

          French politics have been filled with dirt since I care to remember. Besides providing juicy gossip it never changes a thing: people always get arrested/disgraced long after they have lost any relevance. See former President Sarkozy who has been covered by a veritable mountain of dirt all his life.
          Oh and since you seem to know your Spain well how about former King Juan Carlos? ;-)

          Mr Draghi enjoys true widespread support: just think about the big German exporters and their vendors in Austria and Italy or real estate speculators all over Europe. All these people benefited immensely from the monetary policies Mr Draghi is associated with. And let’s not forget the French and Italian governments whose debt has become ridiculously cheap to service and who rule over economies whose corporate debt has literally spiraled out of control thanks to the explicit and implicit backing of Mr Draghi.
          To quote an old Roman saying “The cleanest of the bunch is mangy”.

      • Escierto says:

        Draghi is an absolute criminal. They should lock him up and see what happens to him in prison.

        • suny129 says:

          Tough luck!

          He is part of world wide’ Govt(s) of the Sach empire’ with tentacles into to all corners of the earth OR as Matt Tabbi put the great SQUID with it’s tentacles wrapped around face of humanity, sucking profits, any where it could smell!

        • MC01 says:

          He’s not a criminal: after all which laws did he break? Sure, he has a tendency to speak too much and make promises he cannot keep but if that were a crime we’d have to arrest half the politicians of the world and a good chunk of the movers and shakers of our economy (“I promise you’ll be paid next week, honest!”, “I’ll send a team around to fix it first thing tomorrow morning”, “You’ll have a quote on your desk by Wednesday evening at latest” etc etc etc).

          And I am pretty sure to be not the only one who is rather uneasy thinking about the new ECB that will take shape over the next few months. While everybody is paying lip service to “the need to wean our economy from emergency monetary policies”, the will to do so is about zero. The big goose egg.
          Despite China’s massive new round of stimulus going absolutely nowhere (data Chinese authorities cannot fix hints that veritable flood of renmimbi is not working) everybody seems to want more of those extraordinary monetary policies whose efficiency has waned over the past six-seven months because… nobody is exactly sure, but in the doubt cut rates and buy securities like there’s no tomorrow.

          Children tend to want things they have no idea what to do with: it’s absolutely fine and part of their natural development and it’s up to the grownups to explain to them you cannot have everything you want and to make choices.
          But when you have supposed grownups acting like Veruca Salt and always getting away with it, you know the adults have either left the room or have long been silenced.

  2. Old dog says:

    Men in powerful positions will do anything, I mean anything, to leave a glorious legacy. Most end up leaving a legacy of misery and destruction.

    • GO says:

      He will face no consequence for his hubris and in a few years might even have a few EU buildings named after him.

      • Jack says:

        There will be No EU left!

        So good luck with that.

        In the Next episode of FC II , each European state will revert to its local currency and struggle alone in the face of Rising Russia!

    • keva rosenberg says:

      go out with a bang, fall is coming.

      gosh, hope not.

  3. K. De Vriendt says:

    it’s bribery corruption, intimidation, blackmail, persuation of mister Draghi and possibly other EU-officials by US-parties!!!!!

    it’s just the FED, Treasury, Presidency an even possible the ‘criminal’ agencies CIA, FBI and state department that are in panic about the economic collapse in the U.S.

    Trump is possibly just pretending…

    They want the ECB to easy, so the U.S. dollar wouldn’t collapse!!!!

    • Edward Douglas says:

      I reckon it’s backtracking to pre end action by Trump. They make it sound like Draghi shot off his mouth alone -I don’t believe it.

      When they saw Trumps reaction is was a case of ‘how the he’ll do we backtrack on this? Let’s blame Draghi, he won’t mind as he’s leaving post soon.’

  4. Lemko says:

    Excellent Article!

  5. Auld Kodjer says:

    Draghi dreams of his statue. We dream of undiscerning pigeons.

  6. Dominic says:

    For a rookie investor trying to learn the bond market, would buying puts in TLT at this time seem like a wise investment? Appreciate any comments.

    Great content. :)

    • Memento mori says:

      No, don’t do it. If you are looking for investment advice here, you and your money will be parted soon.

    • Bobber says:

      Puts usually expire worthless, so don’t bet the farm. You’d be throwing darts. In this manipulated market, nobody has an edge except those with inside information. The Fed has removed all logic from the system.

      Keep in mind, the best approach the past 10 years has been to decide what should happen based on economics and rationale decision-making, then do the opposite.

    • There’s a very good case against rate cut euphoria. Bonds may lose value while rates cannot go higher. Certainly if you are sitting on a load of treasury paper you should be very nervous. Should you decide to hedge, and how you hedge that position is your own decision. If you’re running a huge bond fund it’s a lot easier to set up a trade on spec, using a small amount of your cash. For the individual investor the risk reward isn’t very good.

    • Anon says:

      As Bobber says, puts usually expire worthless. I’d try buying TBT instead if you think TLT will fall

  7. Patrick says:

    “bank l̶o̶a̶n̶ gift package”
    There, fixed!

    Is that what they’re calling bailouts these days? I suspect the new normal is a never ending stream of currency to ailing banks. And no one will suspect the banks failed long ago.

    On that note, I can’t help but feel that the Financial Crisis was the dress rehearsal for unconventional central bank policy. If Congress approves buying up corporate bonds and stock indexes, then how do they ever go down in any meaningful way before the currency goes to zero?

    Through all of what’s transpired, the thing that astounds me the most is that there are still economists and financial blog writers who still cling to the notion that Congress would ever impede unlimited expansion of the Fed’s powers; especially when doing so would be fatal to those same Congress critters’ portfolios.

  8. Michael Gorback says:

    As his EuroCrony Juncker said, “When it becomes serious you have to lie”.

  9. Michael Engel says:

    Draghi is not on drugs. Dr Draghi confirm the notion of an inverse Head & shoulders x3 clusters of US interest rates, that will dive, before the mid 2020 popup.
    Draghi realized that the downturn have started in Q3 last year and :
    “further cuts in policy interest rates” will be needed.
    – OIL dropped like a rock since Oct 3rd 2018, with a min target
    of $39.
    – The DJT three phases bull run that started in March 2003 have ended on Sept 9 2018.
    – The SPX new all time high on May 1st 2019 means nothing if the DJT
    do not confirm it. Need them both for confirmation
    – The downturn countdown have started on Sept last year, not on May 1st 2019, or whatever.
    – The banking system on crack, demand for offshore USD rise and the
    global debt problems is growing all over the world.
    Draghi replaced : “remain at the same present level at least the first half of 2020″, with cutting rates.
    He changed his mind about : ” before the ECB begin to raise (!!!) them,
    with the bias still on raising rates, not cutting rates”.
    – Liquidity is needed to satisfy offshore $ quench, to kick the can down.
    – More debt to cure the pain, but not the the chronic debt disease causes.
    – Negative interest rates below average CPI to help politicians keep
    promise, to maintain voters stability, tranquility & sanity……
    – Gravity with negative global rates drag US yield curve down and Powell cannot help it. US middle is caving in, pulling the long duration with them.
    – If Powell will build a wall on the zero line, the middle will crawl in an underground pit hole, below the zero line, but the US long duration might float above zero.
    Within a decade or so, rates will jump like in short covering. The inverse H&S neckline from 2000(H) to 2019(H) already enable investors to calculate a min target for the future rates.

    • Anon says:

      I think you are right about Draghi’s (and the rest of the world managers) thinking. DJT is the only one that might deviate but it is looking more likely that he will go-along-to-get-along. A major change is happening but it is hard to tell what the world will shift to. World managers seem stuck in 1950’s scripts. They want DDE’s vision not DJT’s. China allowing North Korea to be developed would probably save most of the NWO. That could have been the reason for all diplomacy going on at this time.

      • There are two different DJTs at work here. I agree the Fed will get behind the curve, it’s where they prefer to be. As a matter of principle they need to drop rates. Money flow is boffo; Doug Noland’s report last week, credit up in all phases of the global economy and long rates retreating. The Fed can follow quickly or follow slowly.

  10. Cynic says:

    Surely the European situation can be summed up thus: policies must be implemented to ensure that precariously-placed governments somehow keep afloat in the short-term, regardless of long-term damage caused; and this also favours more than a few ‘zombie’ businesses and sectors, eg housing construction.

    The whole shaky, only superficially ‘stabilised’ (stagnating), edifice which we know all too well here.

    These are the most powerful vested interests in the game, and always will be.

    If not, then the tricky issue -so well repressed until now by the Establishment – of the mass re-distribution of wealth (downwards) and aggressive progressive taxation, wealth taxes, etc, will come roaring out of the shadows across Europe.

    This is the vengeful genie, the worst nightmare of the Neo-liberals, that must not be allowed to peep out from the bottle.

    A Potemkin facade of superficial general prosperity, (the mass youth unemployed of Spain, Italy, Portugal, Greece, etc, languish conveniently in the shadows and are no political threat as yet -see the utter failure of Podemos in Spain) with stagnation seen as much preferable to the mass unemployment and political turmoil which would bring real Left progressives and nationalists to the fore,

    This is what Draghi has been tasked with, and his final act is to seek to lock the ECB into this as global conditions worsen .

    • Art V says:

      I think Mario Draghi put it best in 2012:

      “The euro is like a bumblebee. This is a mystery of nature because it shouldn’t fly but instead it does. So the euro was a bumblebee that flew very well for several years. And now – and I think people ask “how come?” – probably there was something in the atmosphere, in the air, that made the bumblebee fly. Now something must have changed in the air, and we know what after the financial crisis. The bumblebee would have to graduate to a real bee.”

  11. RD Blakeslee says:

    “… Draghi as Fabricator & Schemer …”

    What else is old? Nothing to see here – move on.

    “The last duty of a central banker is to tell the public the truth.”

    – Alan Blinder, former Fed Vice Chairman

    • Gershon says:

      Draghi and the ECB know their “extend and pretend” schemes are on borrowed time. The rise of nationalism and populism among the 99% of Europeans who are being pitilessly screwed over by the globalists and financial elites – the sole beneficiaries of the past ten years of central bank “emergency” policies – are rapidly reducing the ECB’s scope to kick the can and put Northern European taxpayers on the hook for its banker accomplices’ non-performing loans.

      The coming Great Muppet Reaping, in which the central bankers’ financier handlers will engineer yet another stock market and asset bubble crash, will be a catalyst for a huge wave of public rage at the gold-collar criminals at the central banks and the financial elites who have been financially strip-mining the increasingly pauperized middle and working classes. As the pillaged sheeple finally become awake and aware, we might finally see some long-overdue fundamental reforms of the global financial system, and accountability for the Keynesian fraudsters, their banker accomplices, and their Establishment party Quislings who have presided over the massive swindles being perpetrated against We the People of the US, UK, and Europe since 2008.

  12. Keeper Hill says:

    Anything to get Euro to parity for Draghi.

  13. Michael Engel says:

    Dr.Draghi have only few month left, dare telling the truth about the status of the invisible global offshore Eurodollar network.
    Its main pipeline blew up in the middle of of 2008.
    The flow of international money, beyond the control of the ECB or the Fed, have suddenly stopped and DB got an “event”.
    Since then DB use a walker.
    Other banks are getting by with nursing aids.
    Few are zombies in hospices.
    After the CB doctors stitched the global offshore network, they
    realized that the main arteries have corroded and liquidity
    was cut by half.
    Dr. Draghi recommend an infusion of new blood to keep the banking
    system alive.
    Have a great Fed day today !

  14. Gershon says:

    There’s no such thing as tapering a Ponzi. Draghi knows that. Powell knows that. So does every other central banker. They are going to monetize and print until the first producer says “Enough!” and refuses to accept fiat currency backed by nothing in exchange for tangible goods and services. And at that point the entire house of cards will collapse like the rotten, corrupt edifice that it has become.

    Prepare accordingly.

  15. akiddy111 says:

    Let’s see what JP does today. The White House wants to see what JP does today before deciding whether to demote him or not.

    I love it !!

  16. Draghi is a lame duck. Tearing a page out of Teresa May’s playbook, when he has already resigned is bit melodramatic, but so was his famous “Whatever it takes..”

  17. raxadian says:

    To be fair, they did not believe him when he did said there wouldn’t be no rate cuts.

    So he could argue that he was being sarcastic.

    “You know what? Fine, there will be rate cuts… someday!”

    “Yay! We are getting rate cuts this year!”

  18. tommy runner says:

    md padding his resume. jp zero-bump, who fires who?
    disagree w/’08 and participants.

  19. Justme says:

    FOMC statement today at 11:00: No rate cut for FFR, majority says no rate cuts in 2019, vocal minority says two cuts in 2019. Majority says cuts in 2020.

    No change to Quantitative Tightening, it is on 15B/20B per month reduction in USG/MBS bond holdings. On autopilot.

  20. Art V says:


    It takes.

  21. Briny says:

    Wouldn’t removing the 30% cap result in de facto federalization of national debts?

  22. HR01 says:



    Was chuckling yesterday after reading the news about Draghi’s comments. At the time, was figuring he was just having fun seeing as how he has one foot out the door already.

    Powell retreating today too. Doesn’t much matter what CB’s do at this extremely late stage of the game. An entire decade of consumption has been pulled forward and the void is upon us.

    Cutting rates at this point will likely accelerate the schedule for decline. Why? Banks suffer along with the non-financials as their margins once again get crimped.

    Consumers are getting squeezed with service and goods inflation. Corporations are now starting to focus on deleveraging. CB’s cutting rates now will only help at the margins for some corporate borrowers in rolling over debts.

  23. Michael Engel says:

    – The ECB provide liquidity.
    Liquidity send rates down.
    Gravity with negative rates send US middle down.
    The middle drag the long duration down.
    – US GDP growth is slowing down, because :
    1) inventory purge.
    2) suppliers smell the stench, press on the brakes, before customers go BK.
    Opt #1, the purge : after a slow down for a QT or two, the economy will peak up momentum and grow.
    Inflation slowly rise, but gravity with negative
    rates will allow the bears to be in charge ==> rates decline.
    After a while, without notice, inflation rise, the bulls takeover, there will be a change of character and rates to jump.
    The bull run cont for another 4-5 years, for a total of 15/16 years .
    In case of a stench, the bull run end now.

    • Art V says:

      There is a lot that can happen in a decade, but the fiscal expansion cannot continue without corresponding economic expansion. Governments and central banks did their best to sustain us, but someone better pick up their consumption lest we face high taxation or worse–austerity.

  24. Chauncey Gardiner says:

    The level of coordination is mildly amusing… Goldman alum Draghi falsely says further ECB rate cuts deeper into NIRP territory are under discussion by the ECB the day before the Fed’s FOMC meeting, while Trump concurrently intensifies his criticism of Fed rate policies in a currency war, says the Powell Fed is clueless, and that he is considering demoting Powell as Fed Chair. This, even as the stawk indexes are concurrently pushed up bigly, presumably to pressure the Fed into lowering interest rates to benefit Wall Street and large speculators. All while the efficacy of negative real interest rates as an economic policy tool to improve the real economy is being increasingly questioned.

  25. Mike Earussi says:

    What I can’t figure out is if they want to stimulate the economy why not just fly over the cities and drop money from a plane? It would drastically increase spending, at least until all the goods ran out and hyperinflation kicked in.

    • Mike Earussi says:

      BTW, why hasn’t hyperinflation been a problem with all the new money Draghi has been pumping into the system?

  26. Gershon says:

    Gold just shot up to $1382, blowing right past the $1350 “Maginot Line” resistance. Looks like the Flight to Quality (and Dash from Trash) has begun in earnest as Powell has signaled more debasement of the dollar is in store.

  27. TheHORROR says:

    What the Central Banks are doing appears to be madness.

    However if you take some time to read this and you accept that it is truth, then the Central Banks actions make total sense.

    Desperate times call for desperate measures.

    Of course if you accept the facts of this research paper, you will immediately realize that there is no way out of this.

    And you will realize that you and your family are on the precipice of horrific suffering followed by death.

    So of course you will reject this research paper because the implications are too horrific.

    THE PERFECT STORM (see p. 58 onwards)

    The economy is a surplus energy equation, not a monetary one, and growth in output (and in the global population) since the Industrial Revolution has resulted from the harnessing of ever-greater quantities of energy. But the critical relationship between energy production and the energy cost of extraction is now deteriorating so rapidly that the economy as we have known it for more than two centuries is beginning to unravel.

  28. medialaxis says:

    The idea you can somehow control the economy by controlling the supply of money, or its cost, is total nonsense. It’s much like saying you can control the national grid by varying the voltage, only the economy’s far more complex than the grid. If an economy’s doing well, and so there’s a high demand for money, then rates will rise (supply and demand). You cannot logically deduce from that that if you reduce rates it will boost the economy. Of course, central banks, together with their well paid economists, will not admit that fact, it’s not in their interest to do so. But some, at long last, are beginning to doubt the waffle they spout.

    As I keep saying, the revolution will not be centralised. The idea only states/central banks can, or should, issue money is dead. I doubt very much many millennials see it that way. They see bitcoin, and now Libra (BTW, it’s not crypto). Anyone can issue money. The trick is getting others to accept it.

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