also be in spotlight in the coming week, reporting third quarter GDP
figures on Wednesday, with data likely showing steady growth at 6.7
percent, as increased budget spending and a property boom offset
stubbornly weak exports.
The ECB is facing weak growth and
super-low inflation, which means Draghi will have to persuade investors
that the ECB is ready to pull the trigger on more stimulus at the same
time that he preserves an escape route since the bank has already done
unprecedented easing and its room to maneuver is limited.
question to decide is whether to extend an 80-billion euro per month
asset purchase program, due to run out in March, or start dialing back
It will be tough call as the hawks, including Germany,
the bloc's biggest economy, oppose any further easing. But a decision
is seen as premature as the euro zone economy is humming along, giving
Draghi some time refine options.
A Reuters poll on Thursday
found economists expecting no change in the coming week's meeting but a
tweak of policy in December. [ECILT/EU]
On the macro front,
industrial production is rebounding, confidence is holding up,
government budgets may provide a touch more stimulus next year and oil
prices are nudging higher, lifting up inflation prospects.
has already said that inflation could rise to ECB's target of close to 2
percent by late 2018 or early 2019, an unusually upbeat projection.
the bank has warned that underlying price pressures still lacked a
convincing upward trend and its projections were predicated on "very
substantial" monetary support, signals analysts said pointed to an
extension of asset buys.
Technical constrains, such as low bond
yields and asset scarcity, have also eased in recent weeks, giving the
ECB time to adjust the asset buying scheme's parameters.
developments since the September meeting have not put the ECB in a hurry
to present additional monetary actions," ING economist Carsten Brzeski
20 October 2016
today's meeting the Governing Council of the ECB decided that the
interest rate on the main refinancing operations and the interest rates
on the marginal lending facility and the deposit facility will remain
unchanged at 0.00%, 0.25% and -0.40% respectively. The Governing Council
continues to expect the key ECB interest rates to remain at present or
lower levels for an extended period of time, and well past the horizon
of the net asset purchases.
monetary policy measures, the Governing Council confirms that the
monthly asset purchases of €80 billion are intended to run until the end
of March 2017, or beyond, if necessary, and in any case until it sees a
sustained adjustment in the path of inflation consistent with its
In his press conference following the ECB
Council meeting, President Draghi stated that the governing council is
still committed to preserving the very substantial degree of monetary
accommodation in the Eurozone. He also stated that the bank will
continue to act, if warranted, by using all instruments available.
The main message from ECB President Draghi was that the ECB would
take further decisions at the December meeting. At that meeting, the
Governing Council will benefit from the new staff projections extending
In response to questioning, Draghi stated that there had been no
discussion at this meeting of extending the bond programme beyond March
Draghi also stated that there was no discussion of tapering but, when
pressed, he also stated that in his personal view, an abrupt end to
tapering was unlikely.
Regarding the current bond programme, Draghi stated that there was no
problem with scarcity of bonds to buy and that the programme was
On the economic side, he stated that the eurozone economy is
continuing to post a moderate recovery and a gradual rise in inflation
with the rate set to rise over the next two months due to base effects.
The economy had also shown resilience, although the risks were still
tilted to the downside.
He also commented that there is no convincing upward trend in
underlying inflation and that the bank wants a convergence, which is
self-sustained, without the extraordinary support in place now.