J. P. Marín-Arrese | Against all odds, Draghi has secured consensus over his stimuli package by a cunny trade-off between the subdued intensity of individual measures in exchange of ample coverage. His brilliant brinkmanship as Chair of the ECB facilitates the task of his successor as Ms Lagarde can wait-and-see comfortably cushioned by a strong and comprehensive arsenal relieving her of the need to change course for many months to come.
JP Marín-Arrese | Christine Lagarde’s nomination ensures the ECB will fully preserve Draghi’s heritage. It will certainly deliver a substantive loosening in monetary policy over the coming months. Everyone expects the first move to materialise this week, probably a rate cut. Anything short of a clear message in the coming press conference would deeply disappoint the markets. Whatever happens next Thursday, more robust action will materialise before the year close.
BofA Merrill Lynch | Our base case remains: if data stabilises, the ECB will be keen on hiking at the end of this year. But our conviction level is low (and declining) – similar to the ECB’s. The alternative, we argued, would be no hike this year, a long extension of forward guidance beyond market pricing and tiering.
Intermoney | The president of the ECB opened the door to further stimulus if the economic and inflation perspectives in the Eurozone remain low, in the shadow of a scenario dominated by downside risks for activity. In fact, he recalled that “there is no lack of instruments” to fulfill his mandate, at the same time as he is contemplating new delays in raising interest rates. Textually he said: “we are assured that monetary policy continues to accompany the economy, adjusting our orientation on interest rates to reflect the new inflation perspectives”.
The Eurozone is showing positive signs of growth and inflation. But the risk premium levels of the peripheral countries are still very high compared with those at the start of this year. In the short-term, they will move to the political beat, particularly any news on the French election.
J. L. M. Campuzano (Spanish Banking Association) | The Fed raised rates yesterday, basically reducing the expansive nature of monetary policy. After listening to ECB board member Praet’s at a G20 meeting, it doesn’t look as if the ECB will raise rates quickly. But conditions could present themselves which favour a change in bias in monetary policy.
Once again Mario Draghi followed the expected script: it kept interest rates at 0%, where they have been for the last year; it left the deposit facility unchanged at -0.4% and did not modify the debt purchasing programme.