Central Banks

Highlights of the Q&A from Draghi

  • somewhat weaker momentum it was acknowledged at meeting.
  • Talked about weaker momentum not a downturn
  • Country specific factors are leading to weaker momentum
  • Export performance is coming back toward normal after an extraordinary move higher
  • Trade uncertainty between US and China has slowed momentum
  • growth returns back to potential after 2017 growth was clearly above potential
  • consumption is still strong help by employment, rising wages, in business investment
  • risks are not big enough to change balance of risks
  • Italy is a fiscal discussion
  • December forecasts a consideration in risk assessment
  • ECB council did not have a big discussion on Italy
  • increases in negotiated wages a comforting sign
  • labor market is tightening progressively
  • ECB has no reason to doubt confidence in inflation

The EURUSD has moved to new session highs on the last comments on inflation /wages but needs to get above the 1.14315 double bottom from the lows from the last two trading weeks. Gains still modest.  

  • ECB hasn’t talked about extending QE
  • QE and not selective measure addressed to one country
  • we haven’t discussed what we are going to do next
  • we still think that we have tools in toolbox for different contingencies
  • central bank independence is a precious thing.  The independence is essential to choose the tools to support monetary policy
  • forward guidance has served the ECB very, very well. Experience has been quite positive
  • monetary union remains fragile if not completed (i.e.,banking union, capital market union). Need strong political motivation. Not a central bank consideration. 
  • I’d be surprised if we were to use a different concept than the capital key
  • ECB monitoring Brexit talks
  • Still confidence good financial solution will be found that reduces financial stability risk
  • There are pockets in the financial markets where values are stretched
  • The private financial sector is not overleveraged; it continues to be able to provide liquidity even in times of uncertainty
  • As time goes by without an agreement, will have to prepare for a hard Brexit


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