No basis for hawkish turn as ECB holds firm
A meeting of the European Central Bank heralded few surprises on Thursday, but added fuel to speculation QE will continue past 2017,albeit in a tempered fashion.
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A meeting of the European Central Bank heralded few surprises on Thursday, but added fuel to speculation QE will continue past 2017,albeit in a tempered fashion.
Eurozone inflation will hit 2% by next year, half of fund buyers attending the Expert Investor forum in Barcelona believe.
Today’s eurozone data certainly gives investors something to think about. Should the action that follows this thinking be a raising of your European equities weighting?
The European Central Bank (ECB) is keeping its monetary policy unchanged, as ECB-president Mario Draghi expressed confidence that inflation in the Eurozone is “converging to our objective”.
While EU leaders unveiled plans for a new €321m state-of-the-art ‘Europa’ Brussels HQ, over in Frankfurt the ECB was building its own foundations for change.
The ECB Governing Council again left monetary policy unchanged when it met on Thursday. It looks like the ECB is buying time to communicate to markets that it’s going to wind down its bond buying programme, albeit in an orderly fashion.
ECB intervention has pushed European corporate bond yields down to unrealistic levels. It may therefore be a good idea to buy some sterling credit, regardless of how the Brexit saga will play out.
The European Central Bank decided to stick rather than twist today as it announced the deposit rate has been held at -0.4%, the refinancing rate held at zero, and the details of its €80bn per month quantitative easing programme are unchanged.
ECB president Mario Draghi conspicuously avoided the B-word when he held a speech in Portugal last week. This may well be because he has yet to find an answer to the problems the vote has thrown up with regards to the execution of the central bank’s asset purchase programme.
The decision by the ECB to include investment-grade corporate bonds in its asset purchasing programme has led to a spike in issuance and to yields edging even lower. While this market response was anticipated by the central bank, its stimulus efforts threaten the viability of the asset class in the longer term .
Janet Yellen’s Economic Club of New York speech provided a timely reminder that the Fed continues to dictate markets. This contrasts with the waning credibility of her counterparts in Europe and Japan.
The ECB’s latest salvo in the fight against the prospect of deflation was initially met positively by markets. But, a lack of a clear message that the Bank will cut rates further from here sent markets falling again almost as quickly.