Highlights of the ECB press conference 25 October 2018

ECB decision 

Statement highlights;

  • ECB expects QE to end in December
  • Stimulus is still needed
  • Economic data came in somewhat weaker than expected
  • ECB can adjust policy as needed
  • Still see broad based economic expansion

The recent weaker data was only briefly glossed over and pretty much ignored.


  • Somewhat weaker momentum was acknowledged in meeting
  • We see weaker momentum, not a downturn
  • German car sector is having a powerful effect on this quarter
  • Brexit, Italy and US/China trade are also having an effect
  • It’s hard to distinguish which factors are transitory and which are permanent
  • Weaker momentum is not enough for us to change our baseline scenario
  • We’ll have to see our Dec projections
  • Confident Italy will find a solution
  • Interest rates are going up for lenders and households
  • As rates go up, the room to expand budgets gets smaller
  • The rises so far in banking rates is not significant now
  • It’s hard to distinguish but there may be some spillover from Italy but it will be limited
  • Negotiated wages are rising
  • We have no doubt that inflation is gradually converging to our aim
  • Even after QE purchases end, we will remain very accommodating via re-investments
  • We haven’t talked about QE extensions
  • We haven’t discussed what to do next
  • We’ll do so when we’ve seen the next projections
  • We still feel we have enough tools to deal with any contingencies

Overall, Draghi went early and fast on telling us that the recent data is not a sign of a lasting downturn, and then did the can kick by saying they won’t know more until the ECB beavers print the new projections in Dec.

We also made it very clear that QE was ending in Dec but that the ECB would still be very supportive with re-investments. Has that appeased the market at all? It seemed to appease some short-term players who took EURUSD up to 1.1432 from 1.1405 but it’s not been enough to maintain as we dribbled back down and now he’s done, have dropped back under 1.1400 to 1.1390.

The ECB won;t mind a weaker euro any way it comes as it helps the exports and inflation. What happens next is in the hands of what the market thinks so further poor data is just going to ramp up bearish views.

Ryan Littlestone

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