ECB underwhelms with the obvious financial market implications – MUFG

By FXStreet FXStreet (Delhi) – Derek Halpenny, European Head of GMR at MUFG, notes that the Governing Council of the ECB agreed to ease its monetary policy stance through numerous steps that were clearly below the consensus in the financial markets and below our more aggressive expectations of possible action.

Key Quotes

“Today, the ECB Governing Council agreed to:

1) Extend the period of QE by 6 months from September 2016 to March 2017.

2) Leave the total purchase amount per month at roughly EUR 60bn.

3) Reinvest principal payments on maturing securities.

4) Extend the asset purchases under the Public Sector Purchase Program to include euro-denominated debt by regional and local governments.

5) Cut the deposit rate by 10bps to -0.30%, effective 9th December.

This set of measures is surprisingly cautious to us and we can only conclude that there has been either an unintended miscommunication with the financial markets or that at today’s Governing Council meeting there was an unexpected greater degree of opposition against a more aggressive set of policy measures.

In the Q&A session, President Draghi answered the question of why the ECB was not more aggressive in their action by reminding us that the QE program since its beginning is …read more

Source:: FX Street