ECB’s Mario Draghi answers questions on the latest ECB decision 14 December 2017

  • A downturn doesn’t seem likely today
  • Forward guidance on the interest rate remains unchanged
  • Size of corporate bond buys was not discussed
  • The council is increasingly confident in the path of inflation
  • Forecast revisions go in the right direction
  • Ample degree of monetary stimulus remains appropriate
  • Did not discuss cutting the link guidance between QE and inflation
  • Output gap will close over the course of the new year and should bring wage gains

So far nothing of any real note. EURUSD has softened a touch more to 1.1820.

  • We did not discuss end date for QE (another comment for the algos, 1.1816 trades)

One question was asking if Draghi has moved away from a prior call that a 1.7% inflation rate wasn’t close enough to target, and that the forecasts/comments now potentially say that it is. Draghi replied that it’s the strength of inflation that’s key. Good spin.

Now on to a question on corp bond buys when a company gets into difficulty.

  • It’s is not unusual to post some losses with such large purchases
  • We are consulting with governing council on Steinhoff bonds (a comp in trouble)
  • AS soon as we heard of trouble, we stopped buying
  • Reported losses in media are exaggerated by a factor of 10
  • Guidance on interest rates will gain importance
  • Likelihood of a downturn is very very small
  • We need to make sure economies are resilient (Here’s the usual poke about fiscal and structural reforms)

This is all going nowhere fast. EURUSD has touched a low of 1.1800 but is back at 1.1815.

And at 14.20, we’re all done.

Ryan Littlestone

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