HALISTER1: RESEARCH ROUNDUP: ECB Tapering a Long Way Off

RESEARCH ROUNDUP: ECB Tapering a Long Way Off

(Bloomberg) -- A Bloomberg News report on ECB QE tapering sent shock-waves through global markets yesterday, sending core European govt bond curves steeper, peripherals bond spreads wider, and EUR ccy higher.
  • As markets continue to digest the story, analysts suggest that tapering of QE was the expected method to reduce accommodation, and still remains a long way off, as the ECB struggles to meet inflation targets
  • RBS (Imogen Bachra)
    • Story only stating the “fairly obvious” that QE will be tapered, rather than suddenly stop; never a realistic scenario where QE would suddenly stop
    • Key point is the time-line, still see the date when QE is tapered as a long way off
    • Markets are unlikely to follow through strongly, don’t believe news will be taken as a hint at a radically different attitude to inflation risk
  • Mizuho (Peter Chatwell)
    • ECB story does not include any information of when the program could be wound down, though it does add to hawkish comments from some Bundesbank and Fed officials
  • RBC (Peter Schaffrik)
    • Offers very little concrete developments; worth remembering previous source-based stories suggested the ECB would be looking to change capital key
    • ECB has not achieved their inflation target, which they cite as key to how long QE purchases will run for
      • Early abandonment of the program before inflation target has been achieved would be a blow to credibility
  • ING (Ben Schroeder)
    • Ahead of any tapering, QE program will be extended in December first; ECB was fast to clarify that the “governing council has not discussed these topics”
  • BNP (Steven Saywell)
    • Talk of ECB QE tapering is very much misplaced; comments are more about the ECB’s eventual exit strategy rather than any indication of the actual timeframe for exit
    • Core inflation is at 0.8% and ECB likely to revise down inflation forecast at the December meeting: MORE
  • Standard Chartered (Eddie Cheung)
    • Too early to price in ECB tapering potential as the central bank is still likely to extend QE: MORE
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

Tickers
2539Z GR (European Central Bank)

People
Benjamin Schroeder (ING Groep NV)
Eddie Cheung (Standard Chartered PLC)
Imogen Bachra (Royal Bank of Scotland Group PLC)
Peter Chatwell (Mizuho Financial Group Inc)
Peter Schaffrik (RBC Europe Ltd)

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