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By Luke Heighton
FRANKFURT(MNI) - Mario Draghi's final monetary policy meeting as European
Central Bank president on Thursday is unlikely to produce the same fireworks as
September's meeting, when the ECB announced a return to quantitative easing and
cut the deposit rate, prompting public dissent from some Governing Council
Here are key points to watch for at the meeting, at which no new monetary
policy decisions are expected:
--Draghi is likely to stick to last month's assessment that eurozone growth
and inflation continue to disappoint, while risks remain tilted to the downside
amid signs that problems affecting the manufacturing sector are beginning to
affect services. Draghi will seek to defend the ECB's analysis that Europe
remains on course to reach its key inflation target of close to, but below, 2%,
albeit at a slower pace than previously anticipated. But the tone is likely to
remain dovish, with the ECB's new tiering operations and the tweaking of the
terms of TLTRO III cited as positive measures that will in time feed through to
the real economy, offsetting the effect of negative rates on banks' profits
while supporting growth through lending.
Draghi may also refer to the fact that credit standards for non-financial
corporations have eased again, even though appetite for borrowing remains
broadly similar to the previous quarter, further supported by the re-starting of
the ECB's asset purchase programme, offering hope that the investment outlook
could pick up as the September package beds in over the medium term.
--PACKAGE "MUST BE GIVEN TIME"
--September's decision to introduce state-, rather than date-based forward
guidance reaffirmed the belief that the slowdown is here for the long-term.
Draghi may reiterate the usefulness of such a formulation in guiding market
--As ECB vice president Luis De Guindos told MNI in an interview earlier
this month, in order for the package announce in September to work, it must be
given time. Draghi will once again throw his weight behind each aspect of last
month's announcement, in spite - or perhaps even because of - the objections
raised by some of his national central bank counterparts.
--September offered an unusually fractious meeting, and led to a strikingly
noisy period afterwards, as doves and hawks went public. De Guindos told MNI
that a period of silence is in order, while respect for the collegial nature of
the ECB's decision-making process should be paramount. Draghi will want to play
down the level of disagreement among Council members, while also hoping to
smooth the path for his successor, Christine Lagarde.
--Draghi will remind Europe's capitals - and Berlin in particular, that
monetary policy is not the only game in town, and that more fiscal stimulus is
--The outgoing president should also reaffirm that the Bank stands ready to
use all the tools at its disposal, and that there remains headroom for more
asset purchases if needed. He may indicate that examining new policy approaches
should form part of the forthcoming strategy review.
-- Amid speculation that disagreement among Governing Council members could
hobble Lagarde's presidency, Draghi may remind his audience that last month's
decisions were passed by a clear majority of Council members, that the principle
of collective decision-making remains intact, and that unconventional monetary
policy has been a success - at least compared with the alternative
--MNI London Bureau; +44 203 865 3829; email: firstname.lastname@example.org