Ok, well the euro may have come off a little in the past 24 hours on profit-taking and general angst as to whether Draghi will have the balls to follow through and “assume Sintra”, but the setup for Thursday was clear.
Euro at a near 15-month high…
…European stocks that are starting to get anxious about currency strength…
…and yields that are ready and willing to “tantrum” at the slightest sign of a hawkish “policy mistake”…
Thursday’s policy decision comes after a Bloomberg report that suggested the central bank is “studying” how to go about exiting accommodation without roiling markets.
As expected, there was no change to the headline numbers, but that’s not really what counts here, it’s the language in the statement and the presser that matter. Here are the bullet points:
ECB SETS ASSET-PURCHASE PROGRAM AT EU60 BLN A MONTH
ECB LEAVES MARGINAL LENDING FACILITY UNCHANGED AT 0.25%
ECB LEAVES MAIN REFINANCING RATE UNCHANGED AT 0%
ECB LEAVES DEPOSIT FACILITY RATE UNCHANGED AT -0.4%
And here’s the statement (note the bolded bits):
At today’s meeting the Governing Council of the ECB decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.40% respectively. The Governing Council expects the key ECB interest rates to remain at their present levels for an extended period of time, and well past the horizon of the net asset purchases.
Regarding non-standard monetary policy measures, the Governing Council confirms that the net asset purchases, at the current monthly pace of €60 billion, are intended to run until the end of December 2017, or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim. The net purchases are made alongside reinvestments of the principal payments from maturing securities purchased under the asset purchase programme. If the outlook becomes less favourable, or if financial conditions become inconsistent with further progress towards a sustained adjustment in the path of inflation, the Governing Council stands ready to increase the programme in terms of size and/or duration.