Draghi\u2019s communication at the December press conferences suggests that the probability of the ECB announcing QE on govies in early 2015 is now significantly above 50%. We still think that March is more likely than January, as preparatory is still on-going, but cyclical developments remain key….<\/p>\n
<\/p>\n
Intesa Sanpaolo \u2013 Research Department – For professional investors and advisers only<\/strong><\/p>\n Markets were partly disappointed with the lack of fresh unconventional measures from the ECB.<\/p>\n Yet, we think that the ECB gets closer and closer to launching a QE. First of all, the ECB now expects that the measures introduced in June and September will have a sizeable impact on the ECB balance sheet, \u201cwhich is intended to move\u201d towards the dimensions it had at the beginning of 2012. Draghi stressed that \u201cintended\u201d means somewhere in between an expectation and a target. The decision to change the introductory statement was taken with a vast majority but not at unanimity and there was no unanimity within the Executive Board either (we suspect, Sabine Lautenschlaeger likely dissented).<\/p>\n Even more importantly Draghi stressed that \u201cQE is not illegal, but not pursuing the ECB mandate, with all possible measures, would be illegal\u201d. Draghi also made clear is that he is working towards a consensus but that the decision to expand the purchases of assets to govies, if needed, would be taken also with a majority, which he should be able to secure. Draghi stressed the ECB discussed purchases of all possible assets including Treasuries but gold. He then he retracted saying that they did not discussed foreign assets purchases this time but some other time as this would be considered tantamount as intervention on the currency market.<\/p>\n The ECB will reassess early in 2015 the monetary stimulus achieved and the outlook for price developments. In the meanwhile the ECB is stepping up preparatory work for QE and discussed several options of asset purchases.<\/p>\n The ECB\u2019s revisions to growth and inflation forecasts for 2015 and 2016 were in line with what we had expected. GDP growth projections were cut significantly and now stand at 0.8% in 2014, 1.0% in 2015 and 1.5% in 2016, from 0,9% , 1,6% and 1,9% in September. The estimate for 2015 inflation came down to 0,7% from a previous 0,9% in 2016 and the estimate for 2016 was cut by only 0,1 to 1,4 on average in 2016 and at year end. The impact of the recent further drop in oil prices on growth and inflation is not included in the December staff\u2019s projections, as the cutoff date was in mid-November. The technical assumptions are for the oil price is 88.5 $ September a barrel in 2015 -16, compared to 105$ and 102.7$ in and 1,25 for the EUR from 1,34 in September. Draghi highlighted that the impact of the lower oil price (- 16%) was in the order of 0,4pp on inflation in 2015 and 0,1pp in 2016. Thus, if the oil price was to be confirmed at current levels, the ECB will cut inflation in March to close to 0,0% in 2015 and to 1,0 -1,1% in 2016. The ECB will need to assess both the direct and indirect impact of the lower oil prices on inflation and GDP growth in the coming months. Draghi clearly stated that the impact on growth is positive but he stressed that the ECB will not tolerate significant deviations of inflation from the ECB\u2019s target to the extent that if this feeds into medium term inflation expectations, it would, at the zero bound, lead to a tantamount increase in real interest rates. We think that at these low levels of inflation and ample output gap the ECB will weigh more the negative impact of the oil shock on inflation than the positive effect on growth.<\/p>\n Ultimately the decision on whether to act or not will depend on the fresh news on the business cycle and whether there are further negative surprises from the data in the coming months. Regarding the likely timing of the announcement, there were rumors, soon after the meeting, that the ECB could pre \u2013 announce a package already in January. We think March is more likely as the ECB will want to reassess its growth and inflation forecasts with more than a couple of data points. In addition, Constancio repeated there are implementation difficulties due to the fact that there is no single bond to buy. Should the ECB opt to buy according to capital keys, we think they would introduce adjustments to avoid severely draining liquidity on the smaller markets and to contain distortive effects.<\/p>\n Quelle: BONDWorld.ch<\/p>\n","protected":false},"excerpt":{"rendered":" Draghi\u2019s communication at the December press conferences suggests that the probability of the ECB announcing QE on govies in early 2015 is now significantly above 50%. We still think that March is more likely than January, as preparatory is still on-going, but cyclical developments remain key….<\/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-1502","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\/1502","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=1502"}],"version-history":[{"count":0,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/posts\/1502\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/media?parent=1502"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/categories?post=1502"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmentworld.eu\/ch\/wp-json\/wp\/v2\/tags?post=1502"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
\n