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ECB minutes: Headline inflation is picking up significantly
ECB minutes from the Dec 2016 governing council meeting
Here are the full minutes.
EUR: ECB To Stay Dovish Next Week Despite Better Data
We do not expect a hawkish stance from the ECB, although the latest economic survey indicators have strengthened further and inflation has risen above 1.0% for the first time in three years. President Mario Draghi will most likely argue that the ECB does not react to a single inflation figure, that the latest inflation gains are due primarily to energy prices and consistent with the ECB’s inflation forecast – broadly in line with last week’s comments from the hawkish executive board member Yves Mersch.
The higher inflation is good news for the ECB but it seems clear that the underlying price pressure is most important and here there are ‘no signs yet of a convincing upward trend’. ECB executive board member Benoît Cæuré said recently, ‘we are still waiting for signs that core inflation is on the rise and will clearly exceed 1%’. We expect core inflation to stay below 1.0% for most of this year, while the ECB looks for a rise to 1.1% on average.
Although tapering speculation is likely to be boosted in coming months by rising inflation, the ECB has, in our view, sidelined itself until H2 with the latest QE extension. We expect headline inflation to rise temporarily above 1.5% but to come back below 1.3% and stay there in H2 17.
Based on this, we expect the ECB to extend its EUR60bn monthly QE purchases into 2018.
source
ECB QE count: Bought €18.903bn vs €10.993bn prior
The ECB's QE shopping week ending 13 January 2017
Total QE 1.2845tn vs 1.2656tn Total covered bonds 207.2bn vs 203.7bn prior Total ABS 23.0bn vs 22.9bn prior Total corporate bonds 54.0bn vs 51.8bn prior
Back to full pelt on the purchases. We may get some further clarification on the ECB's QE plans this ThursdayECB To Strike A Dovish Balance On Thurs; Market Neutral
Having already mapped its monetary policy course for full 2017 at its last meeting in 2016 (8 Dec), the ECB is most unlikely to deliver any further policy adjustments at the upcoming, first Governing Council meeting in the new year on 19 January.
Markets will therefore focus on the ECB press conference, in which Mario Draghi will deliver an update on economic and monetary developments in the euro area over the past six weeks.
In order to avoid any diminution in the current amount of monetary accommodation, we expect the ECB to strike a dovish balance and dispel any taper speculation.
Given the minimal bond and FX market moves since the previous ECB meetings, we expect the outcome of this week’s ECB meeting to be broadly market-neutral.'
source
Draghi To Be Dull; Sell EUR/USD On Any Bullish Reaction
We expect Draghi this week to try to avoid any expectations on further policy changes. The dominant theme in Europe recently has been the acceleration in inflation and real economic activity (Chart of the Day), which ex post seems to justify the ECB's decision to scale back the pace of its purchasing and has led to calls to end QE early. We argue this is premature and that Draghi will likely stick to the December message.
On rates, we will focus on three issues: (1) how Draghi will react to the acceleration in inflation, (2) whether the ECB will disclose the implementation details of the new QE, and (3) comments on the repo squeeze over year-end and the lending facilities in place.
We see balanced and small EUR risks from the ECB meeting. In our opinion, the ECB is done with new policies for now. The FX impact from the meeting will depend to a large extent on Draghi’s rhetoric during the press conference. We expect him to be cautious and defend the December decisions, without providing new details or insights on what could come next.
source
ECB Preview: Draghi Will Want To Stop Tapering Speculation
ECB President Draghi’s press conference will be the main focus with no change in policy likely. Draghi will want to keep speculation over any further bank tapering firmly in check and is, therefore, likely to adopt a generally dovish tone. There is little value in being long EUR/USD into the press conference, but there is the potential for buying on dips.
There is very little chance that the ECB will adjust interest rates at the latest policy meeting and also very little chance of any significant changes to the bond-buying programme. At the December meeting, the extension of purchases was extended until the end of 2017 with a reduced monthly purchase rate of EUR60bn until the end of 2017 and there will not be further short-term changes.
There is the possibility of some further technical changes to the programme to alleviate a shortage of bonds available in the market. There could also be the introduction of technical measures to increase potential ECB bond lending in order to alleviate tensions in the repo market.
The main focus will be on Draghi’s press conference and the bank President faces a tough balancing act.
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ECB Interest Rate Decision: European Central Bank Leaves Interest Rates Unchanged, Refi Rate Remains at 0.0%
As expected, the ECB left all benchmark interest rates on hold following the latest Council meeting with the main refi rate remaining at 0.0% and the deposit rate at -0.40%.
Interest rates were last changed in March 2016 and the bank continues to expect that rates will be held at present or lower levels for an extended period of time and well past the horizon of net asset purchases.
The ECB also made no further changes to the government bond-purchase amount. This followed December’s decision to extend the bond-purchase plan until the end of 2017, but to cut the monthly purchase amount to EUR60bn in April 2017 from EUR80bn at present.
The ECB also commented that the purchase programme can be increased in terms of size or duration if the outlook becomes less favourable or financial conditions become inconsistent with further progress towards a sustained adjustment in the path of inflation. This is the same rhetoric used following the December announcement.
There was no significant market reaction with EUR/USD holding around 1.0660. Bunds remained in negative territory with equities also slightly lower.
Bank President Draghi’s press conference will be watched closely, although he will probably try to say as little as possible.
ECB's Knot says US policy will have impact on global economy
ECB governing council member and Dutch central bank head speaking on tv this morning 29 Jan
Knot spouting forth on a variety of subject with just a hint of a sideswipe across the pond.
Removing QE too early could hurt growth says ECB's Nowotny
Speaking in Vienna
The Eurozone needs more ECB QE
The data stinks so the ECB needs to pump more
Ok, growth was down from 2015 but still, 1.7% isn't that bad when you compare it to the other major economies.
If this was the US markets would be going taper potty, yet we're all supposed to forget about it and carry on as if nothing's happened.
The whole point of QE was to produce results like this. As I've said previously, the only reason the ECB are dumbing this down is to keep the euro in check. The problem they have is that the inflation genie is out of the bottle, and if it becomes entrenched (keep an eye on the core), they haven't got a hope in hell of getting it back in. Everyone else might be happy to ignore it but I'm not and will remain long EURUSD for the long haul.