ECB would gradually taper back asset purchases rather than come to a fast stop - BBH

Research Team at BBH, suggests that while the markets can be an incredibly efficient discounting mechanism, it sometimes is also an echo chamber and it began as a Bloomberg report indicated that there was an agreement at the ECB that when it decided to end its asset purchases, it would gradually taper back rather than come to a fast stop.

Key Quotes

“By the end of the day, it had become, as MarketWatch put it, "...ECB could end quantitative easing efforts sooner than it had planned." 

Today the echo reverberates back to Bloomberg, where one report explains the weakness in equities saying that "Bloomberg reported that an informal consensus was building in the ECB to rein in quantitative easing..."  Moreover, the report leaves out the denial by the ECB spokesperson. 

By itself, the Bloomberg story itself told us little new.  ECB President Draghi had already indicated that there would not be an abrupt end to the purchases when that day arrives.  The original Bloomberg story explicitly noted that before tapering, the current asset program could be extended.  The Bloomberg story essentially confirmed that there was a consensus behind Draghi's remark and that the quantity of 10 bln euros means that it will take most of a year to wind down the purchases.

At the last press conference, Draghi was specifically asked about the issues of extending the purchases beyond March 2017 and the decision-making process.  Some may be more cynical, but there is good reason to accept Draghi at face value.  The decision on asset purchases need not be made until December.  If this is true, then there is no point in talking about it as the full set of information is not available.”