A Dovish ECB Message

September 3, 2015

Today’s Governing Council statement

  • Left the refinancing, deposit and marginal lending rates at 0.05%, -0.20% and 0.30%, their levels since September 2014.
  • Revised the projected future path of GDP growth and CPI inflation slightly downward because of a slowdown in emerging market economies and the recent drop in oil prices.
  • Modified quantitative stimulus (QE) in two ways.  First, the share limit of the public sector asset purchase program was raised to 33% from 25%, which addresses concern that insufficient bond supply could impede the program’s logistics.  Second, when discussing the September 2016 end-point of the program of EUR 60 billion of monthly asset buying, the phrase “or beyond if necessary” was added, hinting that more QE may be introduced. 

Why not augment QE now?  Well the statement notes that the Council “judged it premature to conclude on whether sharp fluctuations in financial and commodity markets could have a lasting impoact on the output for prices and on achievement of a sustainable path of inflation towards our medium-term aim, or whether they should be considered mainly transitory.”  As before, officials asserted that the “size, composition, and duration” QE can and will be expanded if conditions warrant.

The evolution of the staff growth and inflation projections, made in March, June, September and December has been as follows.

GDP 2015 2016 2017
Sept 2015 1.4% 1.7% 1.8%
June 2015 1.5% 1.9% 2.0%
March 2015 1.5% 1.9% 2.1%
Dec 2014 1.0% 1.5%  
CPI 2015 2016 2016
Sept 2015 0.1% 1.6% 1.7%
June 2015 0.3% 1.5% 1.8%
March 2015 0.0% 1.5% 1.8%
Dec 2014 0.7% 1.3%  

Copyright 2015, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



Comments are closed.