ECB: More questions than answers - Danske Bank

According to analysts from Danske Bank, Thursday ECB meeting raised more questions than it answered. “It has been a while since Draghi came out with many words, with so little content”, they mentioned and pointed out that he dismissed outright the notion of any discord between the December minutes and the press conference.

Key Quotes: 

“Draghi has put a lot on emphasis recently on the stock of purchases and not the flows. He did the same yesterday. As redemptions/reinvestments make the picture muddier (as they can be spread out over a period of ‘three months’), a potential catch-up of stocks that are below the capital key such as Ireland is possible.”

“Draghi mentioned that there are ‘few chances’ of a rate hike this year when he was asked if ‘well past’ (i.e. keeping interest rates low beyond the end of QE) could be in line with a rate hike this year. We view this to be very data dependent but we are puzzled why he would even say this. The obvious question is that the ‘ECB never pre-commits’ but forward guidance is exactly that.”

“On the ‘sudden stop’ (to stimulus), he clarified that the comment from October 2017 was his view and that a discussion had not taken place. We already know that Ardo Hansson, Governor of the Bank of Estonia, has indicated that some GC members could see a sudden stop. Draghi emphasised the difference between a sudden stop, extension of the programme and gradual tapering.”