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15 Apr 2015
Draghi tries to temper the ‘taper-tantrum’ – ING
FXStreet (Barcelona) - Carsten Brzeski of ING, argues that although Draghi would have tried to temper the possibility of an early tapering by the ECB, the present fall in EUR and the expected rise in inflation implies it would be challenging for him to temper the speculations in the markets and within the ECB when the Eurozone recovery unfolds.
Key Quotes
“In the days leading to today’s meeting, some market participants had started to discuss the possibility of an early tapering, an end of QE earlier than the officially intended deadline of September 2016. One reason for this discussion is actually the success of QE which has pushed down the euro exchange rate.”
“At its current level, the weak euro would mechanically add another 0.4%-points to inflation, bringing headline inflation above 2% in 2017. This could already happen at the June meeting, when the ECB will present the next staff projections.”
“During the press conference, Draghi tried everything he could to temper the taper discussion. According to Draghi, the tapering discussion was premature. And we totally agree with him. Draghi did not get tired of repeating that the full implementation of QE was required to “provide the necessary support to the euro area recovery”.”
“Moreover, a new sentence in the ECB’s introductory statement clearly tried to temper tapering phantasies: “When carrying out its assessment, the Governing Council will follow its monetary policy strategy and concentrate on trends in inflation, looking through unexpected outcomes in measured inflation in either direction if judged to be transient and to have no implication for the medium-term outlook for price stability”.”
“In our view, this sentence is just ECB language for saying that the ECB can do whatever it wants and use whatever indicator it wants to use to determine the end of QE.”
“All in all, ECB president Draghi clearly tried to temper any taper discussion. Whether he will succeed, is uncertain.”
“If the recovery really unfolds and inflation forecasts start to pick up, Draghi will not only have to temper taper speculations in the market but, even more challenging, within the ECB itself.”
Key Quotes
“In the days leading to today’s meeting, some market participants had started to discuss the possibility of an early tapering, an end of QE earlier than the officially intended deadline of September 2016. One reason for this discussion is actually the success of QE which has pushed down the euro exchange rate.”
“At its current level, the weak euro would mechanically add another 0.4%-points to inflation, bringing headline inflation above 2% in 2017. This could already happen at the June meeting, when the ECB will present the next staff projections.”
“During the press conference, Draghi tried everything he could to temper the taper discussion. According to Draghi, the tapering discussion was premature. And we totally agree with him. Draghi did not get tired of repeating that the full implementation of QE was required to “provide the necessary support to the euro area recovery”.”
“Moreover, a new sentence in the ECB’s introductory statement clearly tried to temper tapering phantasies: “When carrying out its assessment, the Governing Council will follow its monetary policy strategy and concentrate on trends in inflation, looking through unexpected outcomes in measured inflation in either direction if judged to be transient and to have no implication for the medium-term outlook for price stability”.”
“In our view, this sentence is just ECB language for saying that the ECB can do whatever it wants and use whatever indicator it wants to use to determine the end of QE.”
“All in all, ECB president Draghi clearly tried to temper any taper discussion. Whether he will succeed, is uncertain.”
“If the recovery really unfolds and inflation forecasts start to pick up, Draghi will not only have to temper taper speculations in the market but, even more challenging, within the ECB itself.”