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8 Dec 2015
Draghi’s credibility goes for a toss? – Lloyds Bank
FXStreet (Delhi) – Research Team at Lloyds Bank, suggests that against a backdrop of previous bouts of aggressive policy delivery in excess of market expectations and persistently strong hints by President Draghi about the importance of raising euro area inflation as quickly as possible, the recent policy loosening by the ECB greatly disappointed.
Key Quotes
“In addition to the unexpectedly meek loosening, the sharp reactions also reflected President Draghi’s inability to convincingly explain the underlying reasoning for the decision. This has led to speculation that he may have been unable to convince a majority of the Governing Council about the wisdom of a more extensive round of measures than the 10bps reduction in the deposit rate, six-month extension to the QE programme and the addition of regional and local bonds to the pool of eligible assets.”
“With this in mind, markets will be hoping that upcoming speeches by several Council members including Nowotny (Wed), Weidmann, Liikanen and Coeure (all Thu) shed more light on the contours of the debate as well as the prospects for further action over the coming months.”
Key Quotes
“In addition to the unexpectedly meek loosening, the sharp reactions also reflected President Draghi’s inability to convincingly explain the underlying reasoning for the decision. This has led to speculation that he may have been unable to convince a majority of the Governing Council about the wisdom of a more extensive round of measures than the 10bps reduction in the deposit rate, six-month extension to the QE programme and the addition of regional and local bonds to the pool of eligible assets.”
“With this in mind, markets will be hoping that upcoming speeches by several Council members including Nowotny (Wed), Weidmann, Liikanen and Coeure (all Thu) shed more light on the contours of the debate as well as the prospects for further action over the coming months.”