Apparently, the deceleration in eurozone economic activity in Q1 and the political turmoil in Italy isn’t enough to prompt the ECB to take next week’s meeting off the table when it comes to making a potentially momentous announcement about when APP will ultimately be wound down.
Reports on Tuesday confirmed that next week’s pow wow is indeed “live†and that gave the euro a boost. Well fast forward to Wednesday and a trio of ECB officials were out noting that the debate will be front and center next week.
There was Chief Economist Peter Praet, who said: “it’s clear that next week the Governing Council will have to make the assessment on whether the progress so far has been sufficient to warrant a gradual unwinding of our net asset purchases.â€
There was Weidmann who, in a video call following Praet’s speech, said the following:
It doesn’t come as a surprise that for some time now, financial market participants have been expecting net asset purchases to end before 2018 is out. As things stand, I find these market expectations plausible.
This will be the first step on a long path towards monetary policy normalization. Inflation is now expected to gradually return to levels compatible with our definition of price stability.
Then there was Klaas Knot (who back in January was a bit reckless with the hawkishness) who told Dutch members of parliament in The Hague that “it’s reasonable to announce the end of the net asset purchases soon.â€
All of that has the euro at a two-week high:
This raises further questions about whether they’ve missed their window and now think they’re behind the curve. That is, clearly, the outlook has deteriorated both on the economic front and on the political front (in Italy), and it seems like they feel like they don’t have the luxury of waiting around to see if the Q1 deceleration was indeed “transitory†or to see if Italian assets have truly stabilized.
