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23 Oct 2015
ECB: As dovish as it gets, QE extension in Dec - Nomura
FXStreet (Bali) - Nomura is changing its ECB call on when the ECB will announce a change in the monetary policy stance via QE extension to December 3rd instead of its previous March 10th.
Key Quotes
"Previously we expected a QE extension at the 10 March meeting (at the latest), but had flagged for some time now the increasing risks of an earlier move in either December or January."
"Further deposit rate cuts still possible: President Draghi confirmed that the deposit rate could be cut further from here, that it was discussed and that reference to “all instruments” meant exactly that (as we have previously noted)."
"In this context, credibility concerns from the ECB missing its price stability mandate outweigh those of going back on previous comments that rates were at the lower bound."
"There was said to be an open and “rich” discussion about all monetary policy instruments that might be used, although Mr Draghi said no specific choice has been made yet and the relevant committees would work to examine the pros and cons of various instruments."
"However, the Governing Council continues to highlight that the asset purchase programme provides sufficient flexibility in terms of adjusting its size, composition and duration."
"Therefore, we maintain our view that the next round of easing will be focused on the APP, without recourse to the deposit rate at this stage."
"We continue to expect the ECB to extend QE by at least six months to “end March 2017, or beyond” (adding €360bn of stimulus), with risk now of a longer extension (say to June 2017, adding €540bn of stimulus) given the continued sluggishness of the inflation recovery given recent oil price developments (ie, clear risks that inflation in October remains slightly negative and may not move up much beyond 1% in January 2016)."
Key Quotes
"Previously we expected a QE extension at the 10 March meeting (at the latest), but had flagged for some time now the increasing risks of an earlier move in either December or January."
"Further deposit rate cuts still possible: President Draghi confirmed that the deposit rate could be cut further from here, that it was discussed and that reference to “all instruments” meant exactly that (as we have previously noted)."
"In this context, credibility concerns from the ECB missing its price stability mandate outweigh those of going back on previous comments that rates were at the lower bound."
"There was said to be an open and “rich” discussion about all monetary policy instruments that might be used, although Mr Draghi said no specific choice has been made yet and the relevant committees would work to examine the pros and cons of various instruments."
"However, the Governing Council continues to highlight that the asset purchase programme provides sufficient flexibility in terms of adjusting its size, composition and duration."
"Therefore, we maintain our view that the next round of easing will be focused on the APP, without recourse to the deposit rate at this stage."
"We continue to expect the ECB to extend QE by at least six months to “end March 2017, or beyond” (adding €360bn of stimulus), with risk now of a longer extension (say to June 2017, adding €540bn of stimulus) given the continued sluggishness of the inflation recovery given recent oil price developments (ie, clear risks that inflation in October remains slightly negative and may not move up much beyond 1% in January 2016)."