ECB Attempts A Sorta-Taper

ECB Attempts A Sorta-Taper

Hawkish banter from some ECB officials in the lead-up to September's policy meeting wasn't a bluff. The pace of purchases under the bank's pandemic QE program (PEPP) will be "moderately lower" versus the past two quarters, the new statement said. That's a pseudo-taper. And it means I'm compelled to briefly recapitulate for context. Earlier this year, the ECB stepped up the pace of PEPP purchases amid concerns that bond yields might rise, thereby tightening financial conditions. That was in M
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3 thoughts on “ECB Attempts A Sorta-Taper

  1. The Hawks are confused, primarily because they have anticipatory anxiety about what the future holds. The ridiculous notion that the pandemic has passed and that growth is exploding is offset by the reality that global supply chains are still in shock as-is the global economy. The supply shocks are part of the immediate future, more so than inflation. The shocks will force some prices up, but IMHO growth rates have been in a a slow decline for months. Bond rates reflected slower growth back in March as the concept of tapering began to be hyped. The taper jawboning game will be with us for a few years, versus something that may happen any day.

    This is a snip from Twitter this morning:

    “”My expectation is the window to taper is closing,” says
    @elerianm
    . “The market is absolutely right in saying that we are not likely to get an announcement until December…and yet yields are edging higher because yields are also starting to recognize the supply disruptions.”:

    ==> If supply chains are seriously impacted today, growth will slow further and yields will most likely go down … as usual.

    1. Yes, though as someone was pointing out, it makes no sense to try and deal with specific supply shocks with monetary policy. Inasmuch as anything is possible, it has to be done at the fiscal level, like, IDK, support targeted at restaurants or the leisure sector in general.

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