The Strategist

The ECB will revise its rhetoric in early 2018


01/11/2018 - 14:55



The European Central Bank (ECB) is expected to reconsider its position on monetary policy statements at the beginning of 2018 and gradually adjust its rhetoric to reflect the improvement of growth prospects in the euro area. This is reported by Reuters referring to the minutes of the December meeting of the regulator.



The ECB will revise its rhetoric in early 2018
Changes in the ECB's statements on monetary policy are likely to be perceived by investors as a sign that the regulator is preparing to wind down its program of buying up bonds.

The euro exchange rate exceeded $ 1.2 after the publication of the minutes of the ECB meeting. Euro traded on Thursday afternoon at $ 1,2014 compared with $ 1,1948 at the close of the previous session.

"The wording relating to various aspects of the [ECB] position with respect to monetary policy, and statements about future policies can be revised early next year," says the December protocols referring to the beginning of 2018.

Last month, ECB President Mario Draghi kept his promise to pour money into the economy of the Eurozone for as long as necessary, despite the improvement in growth and the outlook for inflation.

However, according to the minutes, the members of the ECB Board of Governors believe that their statements about the future of interest rates, which are now at a record low level, will become more important. This may serve as a signal that buying bonds is gradually losing influence as an instrument of policy.

"While progress has been made towards a steady correction of the inflation trajectory, the relative importance of statements about the prospects for rates will increase," members of the Board of Governors said, noting that further easing of financial conditions is not justified.

At the end of the December meeting, the ECB left interest rates on loans at zero level. The regulator also retained the deposit rate at minus 0.4% per annum, the margin rate for margin loans was 0.25% per annum.

The ECB has confirmed that it will make monthly purchases of assets of € 30 billion from January to the end of September 2018 "or longer, if necessary, and in any case, until the Board of Governors sees a steady correction of inflation in accordance with its purpose for inflation. "

Nevertheless, as noted by Reuters, some politicians openly discuss life after the completion of quantitative easing (QE), which indicates the growing support for the decision to curtail the program later this year.

The minutes of the meeting indicate that the first change could be the ECB's refusal to promise to buy bonds, until inflation returns to the target level.

Investors expect that the ECB will stop buying bonds this fall after a short period of curtailment of the program. However, interest rates are not expected to grow until mid-2019.

source: reuters.com




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