ECB: Re-anchoring risk – Rabobank

Although the September meeting did not come with an official pre-announcement of tapering, President Draghi was quite clear that we can expect some form of tapering to be announced in the upcoming meeting, explains the analysis team at Rabobank.

Key Quotes

“The exact adjustment size –a crucial detail– may have to wait until Dec.”

“Whilst a large part of the market is currently focussing on the details of tapering, pondering for instance whether we can expect gradual cuts or a larger ‘one off’ reduction, we would stress that it will be just as important for the ECB to frame the other aspects of its policy framework, most importantly the forward guidance. Some GC members –Hansson being the most vocal– are also increasingly pointing out that the total policy stance and guidance should be considered.”

“In terms of tapering details, we continue to believe that gradual monthly/quarterly adjustments would be closest to the wishes of the hawks – who grudgingly agreed to an extension last year. Moreover, this would still allow the ECB to shift to a longer-term commitment if market expectations (e.g. an extrapolated end-date) were to lead to too much tightening of conditions.”