I didn’t see any differences between Sept. ECB statement and July statement. Any taper signal would likely have to come in press conf.
No rate move, no change in QE horizon, no removal of QE bias. #ECB stays put.
It’s official, the European Central Bank has not made any changes to its stimulus programme.
Instead, it is maintaining its promise to buy €60bn of new bonds each month until at least the end of December 2017. And it also promises to boost the programme if needed, to keep inflation on track.
Regarding non-standard monetary policy measures, the Governing Council confirms that the net asset purchases, at the current monthly pace of €60 billion, are intended to run until the end of December 2017, or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim.
The net purchases are made alongside reinvestments of the principal payments from maturing securities purchased under the asset purchase programme. If the outlook becomes less favourable, or if financial conditions become inconsistent with further progress towards a sustained adjustment in the path of inflation, the Governing Council stands ready to increase the programme in terms of size and/or duration.
The ECB also says that it expects to leave its interest rate at their present levels “for an extended period of time, and well past the horizon of the net asset purchases”.
That’s not a change of policy, though.
Breaking! The European Central Bank has left interest rates unchanged across the eurozone, at their current record lows.
That means the headline borrowing cost remains at 0.0%.
European stock markets are still up, too:
Markets before ECB: $EURUSD up at $1.1978$DAX up 0.9% $CAC up 0.7%$GBPEUR off at €1.0931 10-yr bund yield at 0.356%
With the ECB’s decision just moments away, the euro is up 0.5% against the US dollar at $1.1975.
Here’s a reminder of what the markets are looking for from the ECB today:
1) What’s the QE plan? Traders want to hear clues about how the ECB will handle its bond-buying programme beyond December. Currently it is buying €60bn of bonds per month; will we hear plans to taper it in January?
The real news was Trump working with Democrats. In rare bipartisan deal, Trump, Republicans and Democrats extended the U.S. debt limit and provided government funding until Dec. 15th. Should the Republican-led Congress pass the bill, the 3-month deal would prevent an extraordinary default on U.S. government debt and keep the government funded for the fiscal year starting Oct. 1.
This was a massive first step. True, it was tied to relief assistance for victims of Hurricane Harvey, but still, the path towards meaningful tax reform (and potentially other stimulus) just got a little less steep. We were perhaps premature in writing off the Trump pro-growth, reflation story – a shift to the center, highlighted by this 3-month extension, could be the start of something real. A unified US government could have profound effects on our market outlook.
Over in Athens, draconian security measures are being taken ahead of the French president Emmanuel Macron making his first official visit to the the country.
More than 2,000 police officers have been seconded around the city centre – including 700 special forces – as Greece prepares to lay out red carpet for the leader of the country that he stood by it throughout the euro zone crisis.
Matt Simpson, senior market analyst at Faraday Research, warns that the euro could tumble if Mario Draghi is more cautious than expected today.
We don’t expect Mario to come out swinging today, but it may only require a tweak of CPI projections, casual reference of a high Euro or hint that QE normalisation talks are underway which could whip markets into a frenzy.
If ECB were to downgrade economic projections, it would be in line with Draghi’s doubt that Europe’s reflationary run remains self-sustainable. Markets would likely take this as strong clue that QE normalisation is pushed well back into 2018 and Euro could find itself under remarkable pressure.”
Excitingly, there’s no clear consensus on what the European Central Bank will do at today’s meeting.
Several experts think the decision on its stimulus progamme could be delayed until October, while the ECB is also expected to raise its growth forecasts and cut its inflation ones.
We have less than four months left before the ECB asset purchase program ends, and the president of the ECB, Mario Draghi is reticent about the future path of the monetary policy. Month after month, the tapering process has been delayed while the recovery in the Eurozone has strengthened. The patient is not sick and there is no need for the lifeline….
Forget about pulling a rabbit out of the hat, when it comes to the ECB’s meeting on Thursday, I expect the statement to be immensely tailor-made. It is widely expected that the ECB would say that they have officially discussed the process of tapering in the light of their latest economic projections.
“ECB president Mario Draghi will give his most keenly awaited speech for a while this lunchtime as traders bet whether he’ll finally confirm plans to cool the central bank’s stimulus programme.
“With the eurozone economy growing consistently and inflation higher, there’s certainly a strong argument to reduce monthly bond-buying from the current €60 billion. However, with the euro still firmly above $1.19, there’s a strong feeling that Draghi will delay any decision until October at the earliest.”
The crucial question facing the ECB is whether Mario Draghi will announce the date of cutting bond purchases. The decision to taper asset purchases was widely expected to occur in today’s meeting, after Mr. Draghi hinted on 20 July that the discussion on tapering assets should take place in Autumn. Since then, the Euro has appreciated by more than 4.8% against the dollar, but declined slightly after peaking at $1.2069.
Technically, the Autumn season starts towards the end of September, so even if Mr. Draghi decided to delay the announcement of tapering the asset purchase program, this wouldn’t affect his credibility. However, the day of the announcement isn’t the only key driver of the Euro’s direction; it’s the game plan going forward.
The euro is continuing to rise against the US dollar, as traders wonder whether the ECB will take a decision on tapering its stimulus programme today.
The first is that the ECB will announce a full-scale tapering of their purchases by 50 billion which would give a massive push to the Euro that will rally towards $1.21 and also change its outlook to clearly positive.
The second option is that the ECB will announce a smaller scale reduction of their program – possibly by 20 billion or so – which would be positive for the single currency, and could send the euro above $1.20 but the mixed reaction from the market would mean that gains would be capped;
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