FXStreet (Delhi) – Research Team at ANZ, note that the ECB President Draghi laid the groundwork for additional policy easing in Europe, highlighting that it could occur as early as the December policy meeting.
Key Quotes
“Draghi noted that concerns over emerging market growth prospects and ongoing weakness in oil prices meant that risks to euro area growth and inflation dynamics remained skewed to the downside.”
“In light of these developments, Draghi stated that the Governing Council would “re-examine” the “degree of monetary accommodation” at the December policy meeting. He added that the ECB is considering the use of “all instruments” within its mandate in order to support activity and lift inflation back to target.”
“This marks a significant shift from the previous policy meeting in September, in which Draghi explicitly stated that the Governing Council didn’t discuss an adjustment to the ECB’s APP. In addition, Draghi stated in the press conference that the Governing Council had now shifted into “work and asses” mode, rather than “wait and see”, clearly signalling that the ECB is on the cusp of providing additional policy stimulus.”
“While Draghi flagged the prospect of further easing, he didn’t explicitly state which instruments the ECB would employ to achieve its mandate. Indeed, during the press conference he stated that the Bank would weigh the ‘pros and cons’ of each instrument before marking a decision. In broad terms, there are two key channels through which the ECB can provide policy stimulus. First, the Governing Council could adjust its current Asset Purchase Programme (APP) by altering its size, duration and/or composition. Alternatively, it could cut the deposit rate from -0.2% further into negative territory.”
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