ECB Officials Speaking Out Ahead Of December Meeting

Image via European Central Bank

ECB On The Wires

Ahead of the keenly anticipated December ECB meeting, comments from officials have started hitting the wires.  Market expectations have already been ignited at the October meeting where ECB chief Draghi noted that the next major decisions regarding the path of the bank’s QE programme would be unveiled at the December meeting. The ECB have been assessing options for increasing the availability of assets whilst the meeting will also provide updated staff macro forecasts. Market expectations at this stage are tilted in favour of the bank announcing an extension of the QE programme beyond the current March 2017 end date. With seemingly more Dovish members than Hawkish, the committee looks likely to achieve in pushing through an extension in line with the subdued outlook for core inflation supporting their argument.

From The Doves

Whilst there does seem to be more Doves than Hawks in the ECB camp it is important to consider both viewpoints with some members having made Hawkish comments recently. Bundesbank President Weidmann spoke in Frankfurt on Friday saying that “most of the reasons for the current low rate of inflation are only temporary in nature! And also noted that “the impact of the strong decline in oil prices is already beginning to be washed out of the inflation rate” and that “what went down will go up”.Following these comments on Monday, the Bundesbank also spoke with optimism regarding the outlook for the German economy saying that the underlying cyclical momentum was “quite strong”.

Furthermore, EuroZone monetary indicators were not demonstrating the need for further action at this stage. Alongside these comments, we also had Executive Board member Yves Mersch noting that the ECB’s unconventional policies should be viewed as “temporary” and that they “should, therefore, be withdrawn again as soon as possible”.However, Mr Mersch also countered these comments with the caveat that “growth is still sluggish and the path of inflation is not self-sustaining, particularly with a view to self-sustaining particularly with a view to domestic price pressures”.