The ECB’s main priority will be to fuel confidence in the financial markets and inflation will be its alibi for this. In February, eurozone CPI receded to -0.2% year-on-year and, in the short term, the region should be prepared for negative rates to continue.
Francesco Saraceno | Yesterday Mario Draghi has called once more for other policies to support the ECB titanic (and so far vain) effort to lift the eurozone economy out of its state of semi-permanent stagnation. I just have two very quick (related) comments.
Does central banks’ “communication” matter? Some analysts believe it does. Therefore, Draghi may now have to work to repair his reputation as “Super Mario”.
Expectations for Draghi’s second QE programme were running so high that, in the end, he disappointed the markets. Investors had bet on more aggressive stimuli, so the European stock exchanges tumbled over 3% at the close (having been in positive territory mid-morning). The euro jumped to over 1,09 dollars (its biggest rise since March) and European debt registered its largest increase so far this year.
The day after Draghi warned about greater than expected weakness in Eurozone inflation data, Spain’s final October inflation number has been published, confirming the -0.7% year-on-year preliminary figure. But despite the fact inflation remains in negative territory, the CPI rose 0.6% month-on-month.
James Alexander via Historinhas | Yet again today we saw the “zero (long and variable) lags” in monetary policy. Central bankers moving markets and thus changing NGDP Expectations happens all the time. It’s perfectly rational too.
Indeed, the ECB can go further. Draghi broke the discipline again by skilfully taking advantage of a dull reference in the communiqué to the ECB’s intention to study all potential possibilities should the need arise.
PARIS | By Francesco Saraceno | So, Mario Draghi is disappointed by eurozone growth, and is ready to step up the ECB quantitative easing program. The monetary expansion apparently is not working out as planned.
Some experts analyse the impact of the first almost 6 months since the ECB announced the launch of its ‘quantitative easing’.
The Corner | April 14, 2015 | On Wednesday’s press conference, Mario Draghi is likely to indicate that ECB QE has got off to a good start operationally and price action terms in the market. Barclays analysts think cautious near-term trading is required in EGB spreads, given poor liquidity and lingering Greek worries.