{"id":1372,"date":"2014-03-07T13:00:00","date_gmt":"2014-03-07T13:00:00","guid":{"rendered":"http:\/\/starthostunlimiteddmffassi-ss.stackstaging.com\/bondworld.ch\/home\/sites\/20b\/7\/760c69a11c\/public_html\/investmentworld.ch\/index.php\/2014\/03\/07\/viewpoint-ecb-draghi-emphatically-stressed-that-monetary-policy-will-remain-markedly-accommodative\/"},"modified":"2014-03-07T13:00:00","modified_gmt":"2014-03-07T13:00:00","slug":"viewpoint-ecb-draghi-emphatically-stressed-that-monetary-policy-will-remain-markedly-accommodative","status":"publish","type":"post","link":"https:\/\/www.investmentworld.eu\/ch\/viewpoint-ecb-draghi-emphatically-stressed-that-monetary-policy-will-remain-markedly-accommodative\/","title":{"rendered":"Viewpoint: ECB – Draghi emphatically stressed that monetary policy will remain markedly accommodative"},"content":{"rendered":"

ECB – Draghi emphatically stressed that monetary policy will remain markedly accommodative even once growth accelerates back to levels above potential, and inflation reaches 1.7% at the end of 2016, given the size of spare…<\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/span><\/p>\n

<\/p>\n

\n

Sign up for our free newsletter to receive weekly news from BONDWorld
Click here to register for your free copy<\/strong><\/a> <\/strong><\/a><\/p>\n

\n

For professional investors and advisers only<\/strong><\/p>\n

\n

capacity. Therefore, we expect rates to stay low at least until 1Q 2016. As core inflation in 2016 (1.7% from 1.4% in 2015) is forecast two tenths above the headline index, it is hard to imagine the ECB doing much more in the near future. Draghi explained that the ECB has decided to leave rates stable as the macroeconomic scenario has been confirmed, and there is no indication either of 1) an undesired increase in money market rates; or of 2) a worsening of the inflation outlook, the two conditions that Draghi had pointed out in February as necessary to prompt further monetary policy interventions. No news on the suspension of the SMP, either, which in fact now seems less likely, as Draghi stressed that it would have a very limited effect on liquidity conditions. The average time to maturity of assets held in the ECB\u2019s portfolio is around one year, therefore liquidity injected by the suspension of the sterilisation of the SMP would remain outstanding for a rather limited period.
The main innovation at the March meeting, as expected, was the release of growth and inflation estimates two years ahead, for the first time  ever. The ECB expects the economic outlook to improve gradually in the next two years. GDP growth is forecast at 1.2% (one-tenth higher than the December estimate) in 2014, 1.5% in 2015, and 1.8% in 2016. In the medium term, growth is therefore expected to accelerate  well above potential (1.2%, based on the latest OECD estimates). The inflation estimate for 2014 has been revised downwards by one tenth to 1.0%; the 2015 forecast is unchanged at 1.3%, and in 2016 the ECB expects an average inflation at 1.5%, ending the year at 1.7%, therefore in line with the ECB target. The ECB\u2019s estimates for 2015-2016 are in line with our forecasts. The ECB still considers growth estimates as skewed to the downside, and consumer price stability risks as broadly balanced. Inflation forecasts are based on exchange rates still on the horizon forecasting and oil prices falling. On this aspect, Draghi indicated that the uncertainty about the assumptions underlying the estimates increases as go forward with the projection horizon. Draghi disclosed that the key point of the discussion within the Council was the slack in the economy. Mention of the large slack in the economy is a new development for the ECB, but we do not think it advances a revising formulation of the forward guidance. Draghi emphatically stressed that monetary policy will remain markedly accommodative even once  growth returns to levels above the potential output, and inflation reaches 1.7%, given the size of spare capacity. The ECB revised downwards its estimate of core inflation in 2014 by two tenths, to 1.1%. Core inflation is forecast to at 1.4% in 2015, and on the rise  to 1.7% in 2016, two tenths above the headline index. As core inflation in 2016 (1.7% from 1.4% in 2015) is forecast two tenths above the headline index, it is hard to imagine the ECB doing much more in the near future.
On the possibility of an ABS purchase programme, the ECB specified that it is being considered by the Council, but there are obstacles in the national regulations that require legislative action. The markets did not react well to the ECB\u2019s decisions: the exchange rate rose above 1.3845 from 1.375 at 1:30pm. Draghi reiterated that the exchange rate is not a policy target, but it is a key point in assessing risks to price stability. In light of the communication which followed the March meeting, we believe the ECB will keep rates at their current levels at least the beginning of 2016, if the macro scenario will evolve in line with the ECB\u2019s latest estimates. At the present stage, therefore, an asset purchase programme seems highly unlikely.
In the event of downside surprises from growth and inflation data, the ECB could, in this order: cut the refi rate to 0.10%; suspend SMP sterilisation; cut the deposit rate; and only as a last resort and in the case of clear risk of deflation, proceed with an asset purchase program.<\/p>\n

\n

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","protected":false},"excerpt":{"rendered":"

ECB – Draghi emphatically stressed that monetary policy will remain markedly accommodative even once growth accelerates back to levels above potential, and inflation reaches 1.7% at the end of 2016, given the size of spare…<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"telegram_tosend":false,"telegram_tosend_message":"","telegram_tosend_target":0,"footnotes":"","_wpscp_schedule_draft_date":"","_wpscp_schedule_republish_date":"","_wpscppro_advance_schedule":false,"_wpscppro_advance_schedule_date":"","_wpscppro_dont_share_socialmedia":false,"_wpscppro_custom_social_share_image":0,"_facebook_share_type":"","_twitter_share_type":"","_linkedin_share_type":"","_pinterest_share_type":"","_linkedin_share_type_page":"","_instagram_share_type":"","_medium_share_type":"","_threads_share_type":"","_google_business_share_type":"","_selected_social_profile":[],"_wpsp_enable_custom_social_template":false,"_wpsp_social_scheduling":{"enabled":false,"datetime":null,"platforms":[],"status":"template_only","dateOption":"today","timeOption":"now","customDays":"","customHours":"","customDate":"","customTime":"","schedulingType":"absolute"},"_wpsp_active_default_template":true},"categories":[50],"tags":[],"class_list":["post-1372","post","type-post","status-publish","format-standard","hentry","category-weekly-analysis"],"blocksy_meta":{"styles_descriptor":{"styles":{"desktop":"","tablet":"","mobile":""},"google_fonts":[],"version":6}},"_links":{"self":[{"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/posts\/1372","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/comments?post=1372"}],"version-history":[{"count":0,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/posts\/1372\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/media?parent=1372"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/categories?post=1372"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/tags?post=1372"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}