BNP Paribas | Oct 23, 2016 05:36AM ET
At its monetary policy meeting on Thursday, the ECB unsurprisingly maintained the status quo. What are the most important points to be gleaned from this meeting?
First, there is what was said, or rather reaffirmed: “the monthly asset purchases of EUR 80 bn are intended to run until the end of March 2017, or beyond, if necessary”. This dismissed the idea that has been circulating in recent weeks of an imminent reduction in the pace of monthly purchases. Although QE is bound to be tapered – an abrupt ending is highly unlikely – this is not about to happen anytime soon.
QE will continue as long as necessary to secure a sustained convergence of inflation towards the ECB’s target, i.e. inflation close, but below 2% over the medium term. Concerning this later point, M. Draghi specified what kind of inflation dynamics he meant: a self-sustained inflation, i.e. driven by robust demand and wage growth. This means that the upcoming rebound in inflation due primarily to energy-related base effects will not be considered satisfactory. From a medium-term perspective, the most pertinent indicator is clearly core inflation (excluding energy and food prices), which, in the ECB’s words, shows “no signs yet of a convincing upward trend”.
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by Thibault MERCIER
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