A look at ECB governing council members' commentary on the week
- ECB's Weidmann (ICYMI) - "no reason to roll out a large-scale programme to stimulate economic activity" (*)
- ECB's de Guindos: Monetary policy is data dependent, not market dependent
- ECB's De Guindos says central bank 'has to act with determination'
- ECB's Nowotny: Central banks should be ready to disappoint markets sometimes
- ECB's Knot says there is no need to resume QE program (*)
Has there been any shift in the rhetoric by the ECB this week ahead of its 12 September monetary policy meeting decision?
For the uninitiated, it may appear so. But when you look at the more hawkish comments (*) being rolled out, they are from arguably the two most hawkish members on the ECB governing council; being Weidmann and Knot.
As such, I wouldn't look too much into those comments as being a shift in the consensus but rather as laying out market expectations ahead of a potential disappointment.
If you pair that with de Guindos and Nowotny's remarks on market expectations, it kind of makes some added sense.
The worry for the ECB is that there may not be enough members sharing the view to restart QE. Even if they do, they would probably need more time to discuss the effectiveness and think of how to deploy such a measure - given issuer/purchase limitations.
It may be a bit premature to announce restarting QE at a later date with the details yet to be ironed out. Then again, with the economic slowdown continuing and price pressures going nowhere, I reckon we'll head down that road eventually.
However, given some uncertainty surrounding a possible QE consensus at the moment, the ECB is trying to manage market expectations so as to not get carried away into pricing that in for the moment.
As such, the central bank is likely viewing that it'll be great if they can get a majority on the decision to beef up their stimulus package announcement. But if they can't, markets should be prepared to be disappointed if they aren't listening to the message above.
