Exclusive interviews with leading policymakers that convey the true policy message that impacts markets.
Reporting on key macro data at the time of release.
Real-time insight on key fixed income and fx markets.
- Emerging MarketsEmerging Markets
Real-time insight of emerging markets in CEMEA, Asia and LatAm region
- MNI ResearchMNI Research
Actionable insight on monetary policy, balance sheet and inflation with focus on global issuance. Analysis on key political risk impacting the global markets.
- About Us
By Chris Mc Innes
LONDON (MNI) - The European Central Bank expects to end its net bond buys
under the Asset Purchase Programme (APP) in December and to begin raising
interest rates no earlier than the second half of next year, ECB President Mario
Draghi announced in Riga, Latvia Thursday.
During the press conference announcing the ECB Governing Council's monetary
policy decision, President Draghi said that, "we will continue to make net
purchases under the APP at the current monthly pace of E30 billion until the end
of September 2018.
"We anticipate that, after September 2018, subject to incoming data
confirming our medium-term inflation outlook, we will reduce the monthly pace of
the net asset purchases to E15 billion until the end of December 2018 and then
end net purchases."
Regarding interest rates, the ECB head said that, "we decided to keep the
key ECB interest rates unchanged and we expect them to remain at their present
levels at least through the summer of 2019 and in any case for as long as
necessary to ensure that the evolution of inflation remains aligned with our
current expectations of a sustained adjustment path."
Justifying today's decision, Mario Draghi reiterated the governing
council's confidence that inflation was well on its way to converge towards the
Regarding the economic outlook, Draghi maintained the ECB's view that
growth was broadbased and sustained. The recent softening of growth, resulting
from a pull-back from last year's high growth, seasonal factors as well as
growing uncertainties in the geopolitical arena, should not detract from this
view, he added.
Moreover, he noted that "the risks surrounding the euro area growth outlook
remain broadly balanced." Yet somewhat contradictorily, he also highlight the
increasing risks to the outlook stemming from increasing uncertainty in the
international environment. The ECB revised down its GDP forecast for 2019.
--DOVES VS HAWKS
Today's unanimous monetary policy decision reflects a careful balance
between the doves and the hawks on the ECB's governing council. The end of net
purchases was announced but the phrasing ("we anticipate") leaves the ECB with
enough wiggle room to deal with any weakening of the outlook.
The same bargain was struck regarding the forward guidance on interest
rates. Maximising the playroom offered by semantics, the exact meaning of the
guidance is cause for some confusion, as highlighted by journalists' questions
during the press conference.
"Through the summer of 2019" could mean during or after the summer. In any
event, the phrasing is again designed to provide the ECB with maximum policy
space and remains conditional on the path of inflation.
And while big questions were answered today, others emerged. Reinvestments
will continue "for an extended period of time after the end of our net asset
purchases." But the timing, size and nature of reinvestments of the stocks
accumulated under the APP will now become the focus of attention.
--MNI London Bureau; tel: +44 203-586-2225; email: firstname.lastname@example.org