Back
5 Dec 2014
Draghi hinted at more easing in January – Danske
FXStreet (Barcelona) - The Danske Bank Research Team expects ECB to implement more easing in January after Draghi suggested reassessment of the monetary stimulus and balance sheet expansion in early next year.
Key Quotes
“In our view it looks very likely the ECB will ease at the January meeting. This follows as Draghi, during the introductory statement, said “early next year the Governing Council will reassess the monetary stimulus achieved, the expansion of the balance sheet and the outlook for price developments”. Further easing from the ECB should follow as the December TLTRO will be a disappointment (take-up of EUR120bn) while we also expect inflation to decline very close to the deflation limit in December (0.1% y/y).”
“According to Draghi the ECB discussed various options of QE today (all assets but gold was discussed). We still expect the expansion of the current purchases to start with inclusion of corporate bonds in January. This should however not be enough to reach the soft balance sheet target, hence in Q2 we also expect the ECB to buy government bond.”
“Although Draghi said today, that the ECB does not need unanimity to do QE, we believe it will be easier to form some kind of consensus about corporate bond purchases in January, while it will take longer to convince the Governing Council about government bond purchases.”
“The Q&A had a lot of focus on the latest drop in the oil price, which has not been included in the newly released projections from the ECB. Here, inflation was expected to be 0.7% in 2015 down from 1.1% in the September forecast and 1.3% in 2016 only a little lower compared to the September projection. Going forward the ECB will assess the impact on wage growth and core inflation from the drop in the oil price.”
“The ECB also revised its GDP growth forecast significantly lower to 1.0% in 2015 from a forecast of 1.6% in September and 1.5% in 2016 from 1.9% in the latest forecast.”
Key Quotes
“In our view it looks very likely the ECB will ease at the January meeting. This follows as Draghi, during the introductory statement, said “early next year the Governing Council will reassess the monetary stimulus achieved, the expansion of the balance sheet and the outlook for price developments”. Further easing from the ECB should follow as the December TLTRO will be a disappointment (take-up of EUR120bn) while we also expect inflation to decline very close to the deflation limit in December (0.1% y/y).”
“According to Draghi the ECB discussed various options of QE today (all assets but gold was discussed). We still expect the expansion of the current purchases to start with inclusion of corporate bonds in January. This should however not be enough to reach the soft balance sheet target, hence in Q2 we also expect the ECB to buy government bond.”
“Although Draghi said today, that the ECB does not need unanimity to do QE, we believe it will be easier to form some kind of consensus about corporate bond purchases in January, while it will take longer to convince the Governing Council about government bond purchases.”
“The Q&A had a lot of focus on the latest drop in the oil price, which has not been included in the newly released projections from the ECB. Here, inflation was expected to be 0.7% in 2015 down from 1.1% in the September forecast and 1.3% in 2016 only a little lower compared to the September projection. Going forward the ECB will assess the impact on wage growth and core inflation from the drop in the oil price.”
“The ECB also revised its GDP growth forecast significantly lower to 1.0% in 2015 from a forecast of 1.6% in September and 1.5% in 2016 from 1.9% in the latest forecast.”