Thu. Jan 23rd, 2020

Draghi faces its penultimate meeting of the ECB with lack of consensus on the resumption of asset purchases

According to the majority of analysts consulted by Europa Press, the monetary authority will announce a package of measures to boost the economy, which will include an additional reduction in the type of deposit facility, as well as a segmentation of said rate for mitigate the negative effect on central banks.

XTB analyst Antonio Sales has assured that it is "expected" that a "package of measures that can transmit to the markets and investors a tone of optimism that motivates credit facilities in Europe and revive the economy" be announced.

However, among experts there is no shared opinion about the composition of that package, especially as regards the asset purchase program, as well as its amount.

Thus, the global director of fixed income of Allianz Global Investors, Franck Dixmier, has indicated that he does not expect net asset purchases to resume "given the lack of consensus among the members of the ECB."

In recent weeks, the governors of the central banks of Germany, Austria, the Netherlands and Estonia, as well as the ECB Executive Committee member Sabine Lautenschläger have argued that such a measure can only be implemented when there is a real risk of deflation, so it is "premature," according to the director of equity and credit strategy at Banco Sabadell, Glen Chapman.

In this sense, Monex Europe analyst Olivia Álvarez has explained that the ECB's group of 'hawks' "may not be unreasonable" in arguing that an early application of bond purchases "would leave the ECB with little weaponry to face dangers elders ", such as Brexit or the commercial war.

However, Álvarez has warned that, although it is not desirable to restart purchases, "disappointing the markets after raising bets so much would not only mean a deeper fall in inflation expectations, but that it would sow an expensive precedent in the transparency and credibility of the ECB ".

In this same line has been expressed the chief economist of Deutsche Bank Spain, Rosa Duce. "Since in 2012 he said his famous phrase 'whatever it takes', it seems that investors have always put the hopes that Draghi is the one who takes chestnuts out of the fire to the economy, so a less expansive message can damage confidence and make the markets suffer, "he added.

For Ebury's risk director, Enrique Díaz-Álvarez, it is "likely" to wait until the October meeting to see a "firm commitment to the purchase of additional assets."


Among those analysts who consider it almost certain that the ECB will restart its asset purchase program, the majority say that the amount will be around 30,000 million euros per month.

"The ECB cannot and should not wait for governments to intervene and has to do what is necessary to fulfill its inflation mandate," added Pictet Wealth Management economists Frederik Ducrozet and Nadia Gharbi.

In any case, the volume and extent of the new package that is announced is an indication that monetary policy "is depleted and is losing its effectiveness," according to PIMCO portfolio manager Andrew Bosomworth, who argues that fiscal policy is It must become "more expansive."

In the event that the ECB announcements surprise the upside, with a more expansive tone than expected, the trend observed in recent months will continue as "flattening curves and narrowing of peripheral bond risk premiums with respect to central countries ", according to the estimates of the fixed income manager of A&G Private Banking Germán García Mellado.

"It may be his last trick, but we hope that Mario Draghi conquers the barricades once more and puts on his 'Super Mario' suit for the last time on Thursday," said ING Germany chief economist, Carsten Brzeski.

. (tagsToTranslate) Draghi (t) penultimate (t) ECB (t) consensus (t) restart

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