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Draghi Sticks Impossible Dismount, Puts Dovish Spin On QE Expiration Date While Simultaneously Adopting Date-Based Rates Guidance
Well, say what you will about the relative merits of Jerome Powell's "plain English" approach to pre
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Dismount? Now? No way in hell. Time to pick up some more of that sweet Powell carry, bay bee!
This isn’t Draghi being in control of anything – it’s market participants constructing their own narratives around words rather than properly construing them.
‘Next summer at the earliest’ is not the same as ‘(basically) precommit to a rate hike next summer’.
‘Unconditional calendar-based guidance’ is one of those meaningless terms beloved of today’s market analysts. ‘We will raise rates in June 2019 and irrespective of incoming data will continue to raise them every other meeting until we announce an intention to stop,’ would have been ‘unconditional’ and ‘calendar-based’. (As well as a tad surprising.) All they have in fact said is that they’re going to do squat for at least a year, after which who knows.
As for ‘quarters rather than years’ – in whose world does four quarters not equal a year? That meaningless wordfest should now be struck from the lexicon.
And just for good measure, even the September wind-down has a data-dependency loophole. Granted the hurdle to doing nothing on this one is now very high, but thereagain it is Europe we’re talking about.