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4 Sep 2015
ECB Review: Moving towards quantitative easing level 2 - RBS
FXStreet (Delhi) – Simon Peck, UK Rates Research Analyst at RBS, notes that yesterday, the overall ECB tone was more dovish than the expectations, suggesting that the ECB chief has laid down the foundations for the second round of quantitative easing.
Key Quotes
“The overall tone was more dovish than we had anticipated. We wrote in our Preview that we expected this to be a small step on the road to QE2. We think it turned out to be more than that.”
“Downside risks to growth and inflation were emphasised and heavier than expected. Emphasis that QE ¬extension beyond September 2016 is possible was much more explicit.”
“The increase in the per¬bond limit for the PSPP from 25% to 33% increases the credibility of extension and acceleration of the program. This change increases the total paper available to the ECB to buy.”
“The Staff forecasts were revised down, including a flatter profile toward the end of the period. End¬2017 inflation forecast appears to be 1.7%.”
“The explicit reference to ‘unwarranted tightening’ in the introductory statement was dropped as Mr Draghi explicitly recognised that such tightening had occurred.”
Key Quotes
“The overall tone was more dovish than we had anticipated. We wrote in our Preview that we expected this to be a small step on the road to QE2. We think it turned out to be more than that.”
“Downside risks to growth and inflation were emphasised and heavier than expected. Emphasis that QE ¬extension beyond September 2016 is possible was much more explicit.”
“The increase in the per¬bond limit for the PSPP from 25% to 33% increases the credibility of extension and acceleration of the program. This change increases the total paper available to the ECB to buy.”
“The Staff forecasts were revised down, including a flatter profile toward the end of the period. End¬2017 inflation forecast appears to be 1.7%.”
“The explicit reference to ‘unwarranted tightening’ in the introductory statement was dropped as Mr Draghi explicitly recognised that such tightening had occurred.”