{"id":1326,"date":"2013-09-06T14:00:00","date_gmt":"2013-09-06T14:00:00","guid":{"rendered":"http:\/\/starthostunlimiteddmffassi-ss.stackstaging.com\/bondworld.ch\/home\/sites\/20b\/7\/760c69a11c\/public_html\/investmentworld.ch\/index.php\/2013\/09\/06\/viewpoint-no-surprises-from-the-meeting-of-the-ecb-governing-council\/"},"modified":"2013-09-06T14:00:00","modified_gmt":"2013-09-06T14:00:00","slug":"viewpoint-no-surprises-from-the-meeting-of-the-ecb-governing-council","status":"publish","type":"post","link":"https:\/\/www.investmentworld.eu\/ch\/viewpoint-no-surprises-from-the-meeting-of-the-ecb-governing-council\/","title":{"rendered":"Viewpoint: No surprises from the meeting of the ECB Governing Council"},"content":{"rendered":"

Interlocutory ECB meeting, with the central bank very cautious, not looking too optimistic on the recovery, and promising to counter potential tensions generated by the decline in excess reserves. BoJ in stand-by.…<\/span> <\/span><\/strong> <\/span> <\/span><\/span><\/p>\n

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No surprises from the meeting of the ECB Governing Council, although some indications are starting to emerge on possible liquidity management actions aimed at reducing the risk posed by tensions tied to technical deadlines.
Policy rates were left unchanged (refi at 0.5%, deposit rate at 0%, marginal refinancing rate at 1.00%), and forward guidance on rates was formulated in the same terms as last month; the idea of introducing quantitative threshold on this front is not being considered: the Council unanimously opted to maintain qualitative guidance. As explained by Draghi in response to a specific question, if the trends of market rates were unjustified in light of the central bank\u2019s analysis, then monetary policy reactions could be in order.
The news of the day is that the ECB has started to shift its attention to excess reserves, which decreased rapidly in the course of the summer. The topic was touched on the introductory statement, and was then tackled more in depth in answering the questions posed by journalists.
At what point, one journalist asked, could excess liquidity become a problem? For the time being, the level is not considered as worrying, but the ECB is ready to act if necessary. Draghi indicated a reference range of 100-200 billion euros as the alert level, warning however that this will depend on the context, for instance on the level of market fragmentation, and that the pace of repayments may not necessarily be the same as observed hitherto. In past months, the ECB has already extended full allocation at refinancing operations until at least June 2014, and longterm refinancing operations are now being considered for the coming months, aimed at smoothing the effects of the 36-month LTROs reaching maturity. The message is complementary to the one provided with forward guidance on rates: the ECB is reassuring the markets by signalling that it does not want tensions on the monetary curve.
In actual fact, the improvement of the outlook is still viewed with great caution by the ECB, that expects a slow recovery in output. In fact, while estimated GDP growth in 2013 was revised upwards (+0.2%), the forecast for 2014 was brought down by -0.1% to 1.0%. The ECB expects inflation to stay low, not only in the next few months, but in the medium term as well (2014: 1.3%, unchanged compared to June), with relatively balanced risks to this forecast.
The conclusion is that policy rates will probably be left untouched for a long time, whereas technical interventions on liquidity should be expected to prevent volatility on short-term rates.
The BoJ meeting also brought no developments, if not a slightly more optimistic assessment of the economic outlook compared to the previous month. Within the outlined moderate growth scenario, the BoJ observes that exports and private fixed investments are recovering at last, and that positive signals are also starting to emerge on the employment and income fronts. The BoJ is committed to keeping in place the qualitative and quantitative easing introduced since the beginning of 2013. One important element for the monetary policy scenario emerged during Kuroda\u2019s press conference, and concerned the possibility of further stimulus being added to counter forthcoming fiscal tightening measures. Kuroda supported the fiscal consolidation plan, expressing the hope that the government will proceed with the plan as announced, and assuring
that in the event of growth being excessively affected, counteractions could be adopted in the form of new fiscal measures or BoJ interventions. This offers important support to the expected fiscal tightening: the Government by the beginning of October will announce whether it will proceed with the planned consumption tax hike in April 2014 (from 5% to 8%).<\/p>\n

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Appendix
Analyst Certification<\/strong>
The financial analysts who prepared this report, and whose names and roles appear on the first page, certify that: (1) The views expressed on companies mentioned herein accurately reflect independent, fair and balanced personal views; (2) No direct or indirect compensation has been or will be received in exchange for any views expressed. Specific disclosures: The analysts who prepared this report do not receive bonuses, salaries, or any other form of compensation that is based upon specific investment banking transactions.<\/p>\n

Important Disclosures<\/strong>
This research has been prepared by Intesa Sanpaolo S.p.A. and distributed by Banca IMI S.p.A. Milan, Banca IMI SpA-London Branch (a member of the London Stock Exchange) and Banca IMI Securities Corp (a member of the NYSE and NASD). Intesa Sanpaolo S.p.A. accepts full responsibility for the contents of this report. Please also note that Intesa Sanpaolo S.p.A. reserves the right to issue this document to its own clients. Banca IMI S.p.A. and Intesa Sanpaolo S.p.A. are both part of the Gruppo Intesa Sanpaolo. Intesa Sanpaolo S.p.A. and Banca IMI S.p.A. are both authorised by the Banca d’Italia, are both regulated by the Financial Services Authority in the conduct of designated investment business in the UK and by the SEC for the conduct of US business.
Opinions and estimates in this research are as at the date of this material and are subject to change without notice to the recipient. Information and opinions have been obtained from sources believed to be reliable, but no representation or warranty is made as to their accuracy or correctness. Past performance is not a guarantee of future results. The investments and strategies discussed in this research may not be suitable for all investors. If you are in any doubt you should consult your investment advisor.
This report has been prepared solely for information purposes and is not intended as an offer or solicitation with respect to the purchase or sale of any financial products. It should not be regarded as a substitute for the exercise of the recipient\u2019s own judgement.
No Intesa Sanpaolo S.p.A. or Banca IMI S.p.A. entities accept any liability whatsoever for any direct, consequential or indirect loss arising from any use of material contained in this report.
This document may only be reproduced or published together with the name of Intesa Sanpaolo S.p.A. and Banca IMI S.p.A.. Intesa Sanpaolo S.p.A. and Banca IMI S.p.A. have in place a Joint Conflicts Management Policy for managing effectively the conflicts of interest which might affect the impartiality of all investment research which is held out, or where it is reasonable for the user to rely on the research, as being an impartial assessment of the value or prospects of its subject matter. A copy of this Policy is available to the recipient of this research upon making a written request to the Compliance Officer, Intesa Sanpaolo S.p.A., 90 Queen Street, London EC4N 1SA.
Intesa Sanpaolo S.p.A. has formalised a set of principles and procedures for dealing with conflicts of interest (\u201cResearch Policy\u201d). The Research Policy is clearly explained in the relevant section of Banca IMI\u2019s web site (www.bancaimi.com).
Member companies of the Intesa Sanpaolo Group, or their directors and\/or representatives and\/or employees and\/or members of their households, may have a long or short position in any securities mentioned at any time, and may make a purchase and\/or sale, or offer to make a purchase and\/or sale, of any of the securities from time to time in the open market or otherwise. Intesa Sanpaolo S.p.A. issues and circulates research to Qualified Institutional Investors in the USA only through Banca IMI Securities Corp., 245 Park Avenue, 35th floor, 10167 New York, NY,USA, Tel: (1) 212 326 1230. Residents in Italy: This document is intended for distribution only to professional investors as defined in art.31, Consob Regulation no. 11522 of 1.07.1998 either as a printed document and\/or in electronic form. Person and residents in the UK: This document is not for distribution in the United Kingdom to persons who would be defined as private customers under rules of the FSA.
US persons: This document is intended for distribution in the United States only to Qualified Institutional Investors as defined in Rule 144a of the Securities Act of 1933. US Customers wishing to effect a transaction should do so only by contacting a representative at Banca IMI Securities Corp. in the US (see contact details above).

Valuation Methodology<\/strong>
Trading Ideas are based on the market\u2019s expectations, investors\u2019 positioning and technical, quantitative or qualitative aspects. They take into account the key macro and market events and to what extent they have already been discounted in yields and\/or market spreads. They are also based on events which are expected to affect the market trend in terms of yields and\/or spreads in the short-medium term. The Trading Ideas may refer to both cash and derivative instruments and indicate a precise target or yield range or a yield spread between different market curves or different maturities on the same curve. The relative valuations may be in terms of yield, asset swap spreads or benchmark spreads.

Coverage Policy And Frequency Of Research Reports<\/strong>
Intesa Sanpaolo S.p.A. trading ideas are made in both a very short time horizon (the current day or subsequent days) or in a horizon ranging from one week to three months, in conjunction with any exceptional event that affects the issuer\u2019s operations. In the case of a short note, we advise investors to refer to the most recent report published by Intesa Sanpaolo S.p.A\u2019s Research Department for a full analysis of valuation methodology, earnings assumptions and risks. Research is available on IMI\u2019s web site (www.bancaimi.com) or by contacting your sales representative.<\/p>\n

Source: BONDWorld – Intesa Sanpaolo \u2013 Research Department<\/p>\n

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