LTRO money may stay in Europe, not flow much to EMs: Lloyds

All attention is on the second LTRO expected from the European banks that will bring with it a tide of fresh liquidity into the system. Trevor Williams, chief economist, Lloyds TSB spoke to CNBC-TV18 about his expectations.

Below is the edited transcript of the interview. Also watch the accompanying video. Q: What are you expecting to hear from the ECB today and how much has already been priced into the markets you think?
A: I think that they have probably priced in something of the order of 450-500 billion euro for the long term repurchase offers (LTRO). That is I think the ball park figure. If its much less than that I think there will be some kind angst in the market, if its much more than that then similarly, which is what you would expect of course, market expectations are there because if it falls outside of that range, then there likely to be a reaction. So, there is nothing we can really say in that.
With regards to the ECB, they have made sure that they have flooded the banking sector with liquidity, helping to boost their capital, allowing them to gain income as well by taking loans from the ECB at 1% and lending it to sovereigns at an average of something like 7% which has helped them to recapitalize.
The point though is will this feed through to the real economy, will it feed through into re-loans to businesses and to households that will then spur economic activity? So, the ECBs actions have calmed the financial markets for now, but longer-term, the issue still remains where is growth coming from? Q: How long do you expect the calm on account of this liquidity infusion to last before the markets start sensing where actually these funds are getting deployed and how much of this money do you expect it to come into emerging markets like India?
A: I don