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3 Sep 2015
Draghi left the door open for QE2 – ING
FXStreet (Edinburgh) - Analyst at ING Bank Carsten Brzeski reviewed today’s ECB statement and Draghi’s presser.
Key Quotes
“The door to more QE is open, even if Draghi also stressed that the ECB today had not discussed this possibility, but will the ECB also walk through this door? To answer this question, one has to go back to the initial QE discussion in late 2014”.
“In our view, back then the deflation threat was a welcome stalking-horse to convince even die-hard monetarists in the Governing Council to sign off QE.
“Of course, successful QE would eventually also increase inflation and inflationary expectations but only indirectly and as a second round effect. The main and most imminent impact from a successful QE would go through a weaker exchange rate and stronger economic growth”.
“Keeping this in mind, lower inflation projections will not per se lead to an increase of QE. To really see the ECB stepping up QE, the Eurozone recovery would need to falter first”.
Key Quotes
“The door to more QE is open, even if Draghi also stressed that the ECB today had not discussed this possibility, but will the ECB also walk through this door? To answer this question, one has to go back to the initial QE discussion in late 2014”.
“In our view, back then the deflation threat was a welcome stalking-horse to convince even die-hard monetarists in the Governing Council to sign off QE.
“Of course, successful QE would eventually also increase inflation and inflationary expectations but only indirectly and as a second round effect. The main and most imminent impact from a successful QE would go through a weaker exchange rate and stronger economic growth”.
“Keeping this in mind, lower inflation projections will not per se lead to an increase of QE. To really see the ECB stepping up QE, the Eurozone recovery would need to falter first”.