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MNI (London)
--More ECB Clarity Expected Over APP Termination In June
--But If Financial Conditions Worsen, ECB Ready To Reboost Purchases
     LONDON (MNI) - Any amendments to the European Central Bank's forward
guidance are likely to be made at the June monetary policy meeting of the
Governing Council, a Eurosystem source told MNI in exclusive comments. 
     "June will be a key month for potential changes to our forward guidance. It
is very likely that with the fresh macroeconomic data we will have, including
new inflation forecasts and other significant Eurozone outlook updates, the
communication strategy and wording in relation to the end of the QE will become
clearer," the source said. 
     The official however warned that there won't be any "revolutionary" nor
"market-shattering" change in wording, but rather a "gradual amendment to the
forward guidance" between June and the APP's termination date.
     "As we go into summer, more clarity is expected with regard to the exact
termination date of the asset-purchase program, but it will be a very gradual
adjustment," the source added.
     The ECB's communication, in the run-up to the June meeting, will thus
likely continue to be "very, very low profile in the next few months," noted the
source, suggesting that the upcoming April monetary policy meeting will be quite
     "Communication will be more and more 'tailored', based upon choices to be
made starting from the new data we will have in June, but the substance won't
change much," the source said.
     According to the Eurosystem source, the "debate area" within the Governing
Council has shrunk with regard to the exact timing of the APP termination. 
     "I must point this out: the debate is no longer on what to do, but how and
when to communicate it. There is no divergence among members, it's just a matter
of small differences, of nuances in the exact communication timing which could
differ by mere weeks," the source said. 
     The source said that the ECB had already made a change to its wording at
the recent March meeting although he felt the significance had not been
particularly noted by financial markets.
     "In our March statement we dropped reference to the possibility of
increasing the APP if needed. This 'absence' proves that the ECB has
acknowledged that the bloc's outlook has indeed changed. Such new wording now
means something different compared to the past -- the eurozone's economy is
improving but markets have failed to pick this up".
     According to the source, the fact that such reference has been removed from
the statement is a positive sign that marks a turning point in the APP wording.
     However, the source was quick to remind that the Governing Council stands
ready to act if the eurozone's outlook should worsen or if financial conditions
become inconsistent with inflation targets.
     "In extreme cases there is no doubt that we would increase the QE if this
happens, like we said when we originally halved the purchases," the official
     But the source brushed away such concerns, noting that the current eurozone
outlook prompted confidence.  
     "But I do not see ahead a worsening of financial conditions. Of course, if
these should occur, everything would be re-discussed and on this point, all
members of the Governing Council are unanimous," the source added
     "Draghi's key words: persistence, patience and confidence continue to
determine the forward guidance, but several communication elements have already
changed and more will be changed going forward," the source stressed. 
--MNI London Bureau; tel: +44 203-586-2225; email:
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MNI London Bureau | +44 203-865-3812 |