15 Apr 2015
ECB: Confetti came premature - Rabobank
FXStreet (Guatemala) - Analysts at Rabobank noted that Mario Draghi may have looked somewhat upset after a brief attack by a confetti-throwing protester, but he remained coolheaded with respect to the ECB policy strategy.
Key Quotes:
"...Sticking to the story line that the program is already starting to deliver results but that it needs to be implemented in full to ensure that the ECB’s objectives are reached."
"The ECB President strongly dismissed talk that its Public Sector Purchase Program is already causing scarcity problems in the market or that the ECB’s policy is creating bubbles in financial markets."
"Indeed, he said that that he was surprised by the attention that an ‘early exit’ had received, while being in the policy for only a single month. He compared this with running a marathon and asking yourself whether you are going to finish only 1km into the race."
"Instead, Draghi stressed that the ECB program was proceeding smoothly and that there was no evidence that scarcity issues “might happen in the future”. However, he acknowledged that the program was flexible enough if circumstances change."
"To demonstrate that flexibility, in the wake of the press conference, the ECB released an expanded list of SSA issuers eligible for purchase on its website.
In response to a question – but obviously with intent – Draghi categorically ruled out a further cut in the deposit rate."
"In our opinion this is significant, as it removes the uncertainty that surrounded the ECB’s key policy rates. On the one hand this re-affirmation of the floor in rates may help banks formulate their own deposit rate policies and on the other it could make it easier for banks to assess whether or not it has become attractive to sell certain bonds to the ECB."
"It also confirms our view that cutting the deposit rate is not seen by the ECB as a logical solution to any scarcity problems (which, again, do not exist to begin with if we are to believe Mr. Draghi)."
Key Quotes:
"...Sticking to the story line that the program is already starting to deliver results but that it needs to be implemented in full to ensure that the ECB’s objectives are reached."
"The ECB President strongly dismissed talk that its Public Sector Purchase Program is already causing scarcity problems in the market or that the ECB’s policy is creating bubbles in financial markets."
"Indeed, he said that that he was surprised by the attention that an ‘early exit’ had received, while being in the policy for only a single month. He compared this with running a marathon and asking yourself whether you are going to finish only 1km into the race."
"Instead, Draghi stressed that the ECB program was proceeding smoothly and that there was no evidence that scarcity issues “might happen in the future”. However, he acknowledged that the program was flexible enough if circumstances change."
"To demonstrate that flexibility, in the wake of the press conference, the ECB released an expanded list of SSA issuers eligible for purchase on its website.
In response to a question – but obviously with intent – Draghi categorically ruled out a further cut in the deposit rate."
"In our opinion this is significant, as it removes the uncertainty that surrounded the ECB’s key policy rates. On the one hand this re-affirmation of the floor in rates may help banks formulate their own deposit rate policies and on the other it could make it easier for banks to assess whether or not it has become attractive to sell certain bonds to the ECB."
"It also confirms our view that cutting the deposit rate is not seen by the ECB as a logical solution to any scarcity problems (which, again, do not exist to begin with if we are to believe Mr. Draghi)."