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.
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