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Edition January 19, 2017 - Crédit Agricole S.A.
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  • Edition January 19, 2017

    ECB: clearly dovish, but how and until when?

    As expected the ECB maintained a dovish stance, downplaying the relatively high inflation numbers of December, and focussed the speech instead on the low and stalling core inflation rate, and on the downside risks. It restated its asymmetrical forward guidance: on rates – they can go lower but not higher over the medium term; on QE – it can be increased in size and in duration but not reduced.

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  • Sommaire :

    - Mandate clarification
    - Dovish economic analysis
    - Unclear clarification of monetary policy tools
    - Conclusion

  • Extract:

    Interestingly enough Mario Draghi clarified the way the ECB understands its mandate. He took it beyond the already known definition – price stability, in the medium term, and a focus on core inflation – he added that inflation has to be sustained, convergent and geographically broad based.
    The ECB tried to clarify the way it intends to purchase bonds below the deposit rate. This clarification is not very clear however: (1) before those purchases were ‘permitted to the extent necessary' and (2) now “priority is given to purchases of assets with yields above the DFR”. This is not a dramatic change, but we think that this clarification slightly decreases the likelihood that the ECB will use the capital key repartition flexibility it has and that it constrains the NCBs in regard to their purchases, which we see as rather negative.


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