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###POV. ECB FORWARD GUIDANCE...............>

ECB VIEW
ECB VIEW: ###POV. ECB FORWARD GUIDANCE POSSIBILITIES
- Yesterday, ECB Minutes said "The language pertaining to various dimensions of
the monetary policy stance and forward guidance could be revisited early in the
coming year."
- The Minutes said that the sequencing is not going to change but that more
guidance on the path of policy rates is required.
- The current guidance is "to expect interest rates to remain at the present
level for an extended period of time and well past the horizon of our net asset
purchases".
- At the Peterson Institute Conference last October Draghi said that "'well
past' is very, very important in anchoring rate expectations". But, since it's
so ambiguous, if removed it could easily cause a bond tantrum. Switching "an
extended period of time" into something more modest, like "a prolonged period of
time" or taking a leaf out of the Fed's playbook and saying that "it expected
that economic conditions would evolve in a manner that was consistent with only
gradual increases in interest rates" would be a more natural baby step.

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