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Wednesday, December 4

4th Dec - Special: ECB Preview

Post will be updated after the event.

Live links



Eurosystem staff macroeconomic projections for the euro areaECB

Live blog recap: ECB’s Draghi Reassures on Tools as Rates Stay PutWSJ

Draghi Paints Gloomy Picture but Signals No New MovesWSJ
Mario Draghi painted a far from happy picture of the state of the euro zone's economy, reaffirming the central bank's pledge to keep its benchmark interest rate at or lower than current levels for "an extended period of time."

ECB Bottom Line: Draghi Is in No HurryWSJ
At Thursday's press conference Mr. Draghi repeatedly passed up opportunities to add specifics to what the ECB's remaining policy options are.

No early Christmas gifts in FrankfurtMerkelnomics

Draghi’s comments can be rephrased as: if deflationary forces increase and/or headline inflation drops unexpectedly, the ECB will ease further. Bolder steps that could be a major step to repair the monetary policy transmission mechanism, however, are technically hard to implement and clearly controversial within the Governing Council. Reverting to rather traditional interest rate cuts could eventually still turn out to be the ECB’s first answer to new deflation risks.

Draghi says ECB ready to act, but unsure howReuters
The European Central Bank is ready to take fresh policy action to support the euro zone economy but has not yet worked out a detailed plan of which policy tool to use when, the bank's president said on Thursday.

ECB Cuts Inflation Forecast as Draghi Pledges Low RatesBB
Draghi re-affirmed that interest rates will stay low for the foreseeable future, after officials cut their inflation forecast for next year.

Draghi Hints Any New Liquidity Tools Will Be ConditionalBB
ECB decides to wait until 2014TradingFloor
The ECB's policy meeting produced no new policy actions. Draghi indicated that the banks are now the key, so policy is on hold for now. But come 2014, that will change.

5 Takeaways From Mario Draghi’s ECB PresserWSJ
Forward Guidance Has Just Got Longer Term * Don’t Underestimate the Toolbox * LTRO Talk’s Getting More Nuanced * Stressing the Value of Bank Tests * Sit Back and Wait

Nothing but a ‘Merry Christmas’ from DraghiDanske Bank
We think the ECB will be surprised by a low inflation print for December and this could trigger further easing (possibly a deposit rate cut) in early 2014…Last month Draghi said, referring to negative deposit rate, that “we are technically ready and it is part of our artillery, and in a sense it also answers the previous question about what we will do if we see a low rate of inflation”.


Q&A on negative ECB deposit rateNordea

What to Expect From ECB MeetingWSJ
The ECB is widely expected to keep interest rates unchanged at record lows following Thursday's monthly meeting of its rate-setting board, after surprising markets with a cut in its key lending rate to 0.25% last month.

Watchful ECB likely to keep powder dry tomorrowTradingFloor
I expect no action from the ECB at its December meeting Thursday, but President Mario Draghi, backed up by new, modest, staff projections, will keep the overall tone of the meeting dovish.

ECB's Draghi needs to plunge a fork into the EURUSD rallyTradingFloor
The sluggish, yet persistent, EURUSD rally of the past four weeks may be coming to a close, but ECB President Mario Draghi is the only one who can really put a fork in it. The US employment report, out Friday, is looming as well.

Will the ECB’s minutes overrun?Money Supply / FT
However, a few months ago Mario Draghi made quite a firm pledge to tell us by the end of the autumn how the ECB intended to go about producing an “account” of the governing council’s policy deliberations. Will Mr Draghi end up breaking his promise?

PREs, VSPs, and the ECBKrugman / NYT
Whatever Praet may privately think, he and his boss have to deal with Europe’s Very Serious People — people who believe in austerity regardless of circumstances, and who also say things like this, from the Bundesbank’s Jens Weidmann, declaring that “the money printer is definitely not the way to solve [Europe's problems]“.

ECB Preview: More stimulus, but not in DecemberDanske Bank

An important but also confusing speech by Peter Praet on disinflationECB Watchers
Praet explicitly recognizes that non-standard measures can also be used to fight “falling prices”, and not just to address financial fragmentation as in the Trichet doctrine. This is a pretty important departure from a doctrine point of view and may open the door to more agressive actions.

Draghi Shares Exchange-Rate Views With Central Bankers WSJ
ECB Denies Comments Hungarian Counterpart Attributed – Portfolio

An important but also confusing speech by Peter Praet on disinflationECB Watchers
Praet explicitly recognizes that non-standard measures can also be used to fight “falling prices”, and not just to address financial fragmentation as in the Trichet doctrine. This is a pretty important departure from a doctrine point of view and may open the door to more agressive actions.
Can we just hurry up and go negative already?alphaville / FT
Your ECB: fewer hawks, more dovesalphaville / FT
The increasing north/south divide that has accompanied the euro area’s drawn out crisis has lead to the balance of power shifting to the periphery. Or: doves in the ascendant. Interesting too that the Bundesbank might thus be pushing for ECB minutes to be released in order to quell those national interests.

ECB Viewpoint: Not again… - Nordea
We expect very dovish signals from the ECB at this week’s monetary policy meeting, but no change in key rates * Risks are clearly skewed towards another rate cut and the door is likely to be left wide open to all non-conventional measures including a negative deposit rate, LTROs or possibly even QE * We could easily see the ECB announcing new liquidity measures to ease concerns around the turn of the year.
Please sir, I want some more: Italy editionalphaville / FT
Presenting Italy, a central plank in the argument for a new vLTRO or at least an extension of what we already have
Eurozone liquidity is getting tightalphaville / FT
Negative Rate Experiment in Denmark Seen Stretching to 2015BB
Economists at Denmark’s biggest banks predict the nation’s benchmark interest rate, which has been negative since July 2012, won’t climb over zero until 2015 marking an historic experiment with extreme monetary policy.
Monitor: Euro area deflation monitorDanske Bank
Euro area inflation is below the ECB’s 2% target and declined to 0.7% in October. The decline is due to a combination of low wage pressure and the end of the super-cycle in commodity prices. We expect inflation to remain far below the ECB’s target in 2014-15.
Euro zone mulls cheap loans as incentive for economic reforms Reuters
ECB mulls new loans to banks, with conditions: paperReuters
ECB contemplating new LTRO - with a twistSober Look
An ECB funding for lending trial balloonalphaville / FT
If the dataflow deteriorates quickly, and the technical conditions to get private assets purchases – which we think would be fundamentally the right thing to do – cannot be met with commensurate speed, then a negative deposit rate cut or a liquidity measure would be the natural first port of call.
Decoding Michael Noonan, or: Is OMT only for Italy?Brussels blog / FT
“According to Mr. Draghi, OMT is for a systemic crisis in the euro and will apply across the eurozone.”  If Noonan is accurately relating his conversation with Draghi, it seems to change the very nature of OMT.
Should the ECB go negative?Money Matters
There are significant uncertainties for at most a modest benefit. If the ECB choice was an investment choice, one would say that the Sharpe ratio is unfavourable