ECB President Mario Draghi moved decisively to quell market fears of discord on the policy-setting Governing Council on Thursday as he played down reports of a rift between himself and other members of the committee.
In particular, analysts noted Draghi insistence that the governing council is unanimously supportive of taking further extraordinary policy action, if required to raise inflation and help the struggling Eurozone economy.
The following are excerpts of analysts’ reactions collected by MNI:
Jan von Gerich, Holger Sandte, Economists at Nordea:
“This meeting was clearly about building credibility that the ECB stands united after the recent media reports of a revolt inside the Governing Council. The December meeting will be about action again. Draghi repeated time and again the unanimity behind the statement and the preparedness to take further action.”
“The balance sheet target is now official, as it was brought into the statement, and thus enjoys the backing of the entire Governing Council. Draghi sounded very committed to reaching this target.”
Thomas Meissner, Rates Strategy, DZ Bank:
“In all, we see little reason to change our ECB forecast: Interest rates will remain at these ultra low levels and large scale sovereign bond buys next year look increasingly likely.”
Philippe Gudin, Economist, Barclays:
“President Draghi explicitly mentioned two contingencies in order for the ECB to implement further measures to expand its balance sheet: 1) the current purchase programmes are not enough to reach the balance sheet expansion target; 2) further worsening of the inflation outlook. He also indicated that the ECB staff and the relevant committees have been tasked with evaluating other non standard monetary policy options, should they be necessary.”
“We expect the ECB to move towards QE on EGBs by early 2015. We think that a meaningful balance sheet expansion would help re-anchor inflation expectations and weaken the euro further.”
Howard Archer, European Economist, IHS Global Insight:
“It is significant that the ECB’s statement and Mr. Draghi’s comments made it clear that the target is to get the ECB’s balance sheet to around 3 trillion euro, as there had been media reports that some Governing Council members had been unhappy with Mr. Draghi indicating a target level in earlier remarks.”
“Indeed, while Mr. Draghi acknowledged that there were disagreements within the ECB, he made a point of stressing the Governing Council’s unanimity in the signing of the ECB’s statement and in its commitment to undertaking further unconventional measures if need be. He also stressed that there was not a North-South division within the ECB.”
Christian Schultz, Berenberg:
“Draghi’s press conference was a demonstration of unity and readiness to act at the ECB. According to Draghi, the entire Governing Council signed off the target of boosting the ECB’s balance sheet by E1 trillion back to the early 2012 level of E3 trillion.”
“Furthermore, the governors unanimously tasked staff with preparing further easing measures, in case the existing measures failed to reach the target or the inflation outlook deteriorated further.”
“The Governing Council now closed the ranks and emphasised their easing bias. Draghi also said that there was no north-south divide in the Governing Council, an apparent hint to Berlin. We expect that the ECB’s conditions for more easing will be met. That strengthens our call that the ECB will announce further easing measures at the December meeting, with a 60% chance for corporate bond purchases.”
Carsten Brzeski, ING:
“There was a… remarkable comment by Draghi, underlining the ECB’s determination. Despite recent quarrels, the introductory statement repeated the Governing Council’s unanimous commitment to using additional unconventional instruments within its mandate.”
“During the Q&A session, Draghi said that purchasing government bonds would fall in the mandate. The final important sentence was the announcement that the Governing Council ‘has tasked ECB staff and the relevant Eurosystem committees with ensuring the timely preparation of further measures to be implemented, if needed.’ A clear message.”
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