THE ECB IS EXPECTED TO KEEP QE UNCHANGED BUT WORK ON MARKET COMMUNICATION

21 January 2016, 07:18
Mohammad Soubra
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THE ECB IS EXPECTED TO KEEP QE UNCHANGED BUT WORK ON MARKET COMMUNICATION

 

The ability to communicate clearly with markets by the ECB was questioned after the December 3, 2015 rate statement. At first it was a welcomed surprise how the central bank headed by Mario Draghi had a higher sense of urgency and wanted to act before the end of the year to add more stimulus rather than wait until 2016 as most forecasters had anticipated. The rhetoric by Mario Draghi was enough to drive the EUR lower, but all that was quickly reversed when he delivered less than promised on the December central bank meeting.

There are few expectations the ECB will add additional stimulus next week. The Chinese market turmoil that started a major sell off in global stock markets along with the drop in oil prices continue to put downward pressure on inflation, with the market anticipating a move from the ECB in March after the QE extensions in December. Mr. Draghi has the opportunity to alert the market of the ECB’s eventual decision, but this time avoiding the miscommunication from the last monetary policy meeting. The ECB will announce its minimum rate on Thursday, January 21 at 7:45 am EST to be followed by a press conference with President Draghi at 8:30 am EST.


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