ECB Rate Cut; Muted European Markets
RICHARD QUEST, HOST: Ready to act. The ECB cuts interest rates and says it stands ready to do more.</s>QUEST: -- statistician made famous by the 2012 presidential election, and tonight gives us his tips.</s>NATE SILVER, AUTHOR, "THE SIGNAL AND THE NOISE": The lesson of hedging your bets is pretty important.</s>QUEST: And FYI, I will go through the most irritating business jargon, and so keep it on your radar. I'm Richard Quest, I mean business. Good evening. The European Central Bank, the ECB, is considering an unprecedented step into negative space. For the first time, the bank said it is technically possibly, "technically ready," in their words, to move its deposit rate below zero. It would mean eurozone banks would have to pay the ECB to hold their money.</s>QUEST: Today, the bank snipped a quarter percentage point of its main -- the refi rate, its widely anticipated move, and it now comes down to an historic low of just half of one percent. Here is the ECB president talking about the current threats to the eurozone economy.</s>MARIO DRAGHI, PRESIDENT, EUROPEAN CENTRAL BANK: There is surrounding the economic outlook for the euro area continued to be on the downside. They include the possibility of even weaker than expected domestic and global demand and slow or insufficient implementation of structural reforms in the euro area. These factors have the potential to dampen confidence and thereby delay the recovery.</s>QUEST: Mario Draghi. The markets and investors and pundits, skepticism abounds. After all, a small rate cut, can that translate into anything that will help the worst-off eurozone countries, the likes of Spain, Portugal, and Greece? Partly because what we call the transmission mechanism, which takes interest rate cuts, and then moves it through the economy onto the ultimate consumers, you and me. It's said that that is broken down. Jim Boulden is with me. We'll come to the transmission mechanism at the moment. Even -- just at the so-called zero bound of interest rates, when they're virtually zero --</s>JIM BOULDEN, CNN INTERNATIONAL CORRESPONDENT: Yes.</s>QUEST: -- if people are not borrowing at three quarters of a percent, they're not going to borrow a half a percent.</s>BOULDEN: No. They're not. And -- I think --</s>QUEST: So, why is he doing it?</s>BOULDEN: Because the ECB needs -- was, I think, almost talked into doing this by the markets. I know they would never say that, but the markets expected a half a percent interest rate, now, and they had to cut it from three quarters of a percent. So, they did this move because not doing this move would've looked very negatively. But to actually make a difference to the banks, this is where it has to happen. And this is what he talks about, again, Mario Draghi, in the press conference: the need to see this money moving through into the real economy, and it could take a long time, it could take a short period of time. They don't know. But they've done a lot of things for the banks. As he keeps saying, "We've been extremely accommodative" in his -- that's his term. With all these non-standard measures that they talk about. Trying to find --</s>QUEST: But no --</s>BOULDEN: -- different ways.</s>QUEST: But no new</s>BOULDEN: No.</s>QUEST: -- non-standard measures.</s>BOULDEN: No.</s>QUSET: So, he's continuing --</s>BOULDEN: Extending them, though.</s>QUEST: He's extending -- he extended the refinancing, and he extended the full allotment there until July of next year.</s>BOULDEN: Yes.</s>QUEST: So -- but no new measures.</s>BOULDEN: No, no new measures. And in -- so the interest --</s>QUEST: What's he waiting for?</s>BOULDEN: Well -- he keeps saying that it's up to the governments to do their part to have all this massive, massive changes to their economies, because the bank can only do so much. And he seemed a bit more irritated today than he has in the past when people keep asking him, why don't you do this? Why don't you do that? The timing. So, it seems to me like he thinks, again, that governments have got to do more of the restructuring of their economies, but that takes a long time to fix.</s>QUEST: Jim, there was an extraordinary tweet from His Holiness the Pope. The pope tweeted today, "My thoughts turn to all who are unemployed often." I mean, it's one thing to say that. But this is the best bit. "Often as a result of a self-centered mindset bent on profit at any cost." Pope Francis --</s>BOULDEN: Yes.</s>QUEST: -- saying that.</s>BOULDEN: He wasn't saying that about Mario Draghi, he was saying that about people who are making money in the stock markets. Because while all this is going on, of course, the stock markets continue to rise. And he sees that, the pope, apparently, on the back of the problems in Europe. But it was interesting, because Mario Draghi was asked about this at the very end of the Q&A;, and he kind of stumbled through his answer. Let's take a listen.</s>DRAGHI: We are -- let me use the word -- well, yes. I would use the word "frustrated," yes, certainly. We view improvements in the financial markets. We think financial markets are the only and the necessary channel through which monetary policy is needed. You don't go around with helicopter money, throwing money. Just -- you have to -- in Europe, you go through banks. You don't have capital markets, as they said in the United -- as you have in the United States. And so, we have to go via the banking system. And so, that's why in my press conference, I tried to give you a very detailed reading of different indicators, because it shows how closely we're trying to examine and analyze reality to see where these impulses that we've been transmitting to the economy since now a long time get translated into better wealth or better, lower unemployment, better economic activity.</s>BOULDEN: And there, of course, he's talking about the transmission mechanism along with what the pope had to say.</s>QUEST: Jim, many thanks. Let's just have a quick thought of some other things that the pope actually said. Some of your reactions, @RichardQuest, by the way. Martha B. Bayenda, "He is a pope, not a finance expert." Luis Hernan Cortes, "The financial and economic problem is moral." Promise: "Yes, we need regulated capitalism." "I attended St. Thomas's University," says one. "If you want to know about mindsets profiting at any cost." It was a fairly muted reaction on the stock markets. Investors had had a rate cut priced in for some weeks now, so rates and opinions are very much divided. That's the way the market went over the course of the session. Very little movements, bearing in mind that there was a rate cut. In New York --</s>QUEST: -- a very different state of affairs. Up 120 points, a strong session, nearly a one percentage gain on the day. The New York market is rallying sharply. Now, South Africa's finance minister tells this program Africa is the hope of the world, and South Africa is at the heart of the hope. After the break, Pravin Gordhan. Also, we'll stay on the African continent mining for gold. When the price plunges, so do profits. The chief executive of Randgold Resources. It's QUEST MEANS BUSINESS, good evening.