Have economists outed themselves as retards?
Picrel:
Lower part ECB survey on expected DFR (rates) as well as expected ESTER (interbank lending rate overnight).
Upperpart left: Historical diagramm of the ECB rates and ESTER (previously different name, EONIA).
Upperpart right: Key ECB rates history
Problem: Currently the ESTER is always BELOW the DFR (the lowest ECB) rate.
Solution? Change the gap between the three key ECB rates DFR, MFR and MLF
Method: From september onwards the ECB changes the relation between the rates.
Nowadays the gap between DFR and MFR (middle rate) is 0,5%.
In september they will reduce this gap to 0,15% (articles below). In their report they even say that it is intended to have an effect on the ESTER.
Why would it have such an effect?
We can see what effect it had in 2013, when the ESTER went up above the DFR, when the gap between the DFR and the MFR of 0,5% was lowered to 0,25%. It caused a little bit too much volatily though, so to reduce the volatily they then reduced also the gap between the MFR and the MLF (right rate).
From this historical diagram and the future change + reasoning of the ECB, every economical analyst should be able to tell and expect the ESTER in future to be at the DFR level or maybe and hopefully above it. Yet they still expect it for the future months to be below the DFR.
Here you can read on it:
Announcement for change in March for September:
https://www.ecb.europa.eu/press/pr/date/2024/html/ecb.pr240313~807e240020.en.html+
Explanation by Schnabel:
https://www.ecb.europa.eu/press/key/date/2024/html/ecb.sp240314~8b609de772.en.html 