ECB June rate decision – as it happened | The World
Market uncertainty over when the ECB will lift its deposit rate rests on of sooner from Draghi at tomorrow's ECB meeting could boost the euro. Press conference following the meeting of the Governing Council of the European Central Bank on 13 December at its premises in Frankfurt am Main. As we heading towards the much awaited ECB's December meeting, of the euro to persist whatever the outcome of the ECB meeting tomorrow.” BBH Second is adjusting the decision-making rules about the purchases.
This is a live meeting in the sense that policy announcements are expected to be forthcoming. What is at stake is not interest rates.
Instead, decisions are needed about its asset purchases. First is extending the program past the current soft end-of-March time frame. Most are focusing on a six-month extension, mostly on the basis that that was the length of time of the previous extension. There is some speculation that the ECB could scale back the amount of monthly purchases currently 80 bln euros. If this does materialize, we suspect it may be an operational tweak in the covered bond purchases.
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Second is adjusting the decision-making rules about the purchases. We suspect the ECB can modify some of its own rules, like the individual issue cap.
The ECB may also apply the minus 40 bp floor on the portfolio level rather than the individual security level, and this too would overcome or minimize the scarcity operational challenge. Third is measures relating to the securities lending program to address the stress in the repo market.
There has been some speculation that the ECB will take measures to improve its ability to provide the securities it buys back to the market. Nomura Our baseline remains a six-month extension to the programme duration that would take it to at least September We also expect the ECB to maintain the current pace of purchases of EUR 80bn per month, although with balance of risks skewed towards an extension but at a slower pace.
The ECB might also alleviate the deposit rate constraint but we see this as less strategic for the smooth implementation of the programme at the current level of rates. Finally, we do not expect any changes in either of the policy rates at the December meeting.
Markets will also be eyeing updated macro forecasts, and especially the HICP forecast foras the ECB has moved forward introducing its forecasts by 3 months, likely for a good reason. We look for HICP at 1.
Indeed, the lack of any clear improvement in core inflation and the risk of a premature retightening in financial conditions following the recent rise in interest rates would, in our view, be strong arguments behind this decision. So finding the right balance in this message to the market is key. Therefore we expect the ECB to emphasize that the program cannot continue forever, that it will review its options during the course of the program but that any adjustment after September will be data-dependent.
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Either the central bank must upgrade its forecast, or add further stimulus. We lean towards the former outcome. Inflation likely will increase faster than the market and the central bank expect, in the short run, and growth will remain resilient.
Reinstatement of the waiver was important as it carried both symbolic and substantive benefit. And in the near-term it would have been a nice liquidity boost for Greek banks and the real economy. This is a big political loss for Tsipras and his government. Greek banks stocks are falling and yields on its two-year paper have jumped following the decision to delay from the ECB.
National Bank of Greece shares have dropped 6.
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The latest projections were explicitly conditioned both on existing stimulus and also those measures that have been announced, but are yet to be implemented. This means that there currently is a high chance that the ECB will eventually have to top up its monetary measures, rather than starting tapering early. There are only two, currently rather unlikely, scenarios in which the ECB would start tapering, at least after the official end of QE in SpringRules for meeting the royals