Reuters reported Wednesday that the European Central Bank President Mario Draghi will not, as was previously rumoured, signal a change in monetary policy at the Fed’s Jackson Hole conference. Instead he’s going to hold off until the Fall.
Draghi rattled markets in July when he indicated the ECB might start tapering back on its bond buying program next year.
“So I guess August 25th won’t be a big deal after all,” Peter Boockvar of The Lindsey Group wrote to clients. He added:
While I don’t believe this changes at all the content of the news and only impacts the timing of its delivery, the euro is lower in response and that in turn is what’s lifting European bourses. As to what month we get the news, Reuters said that according to these sources, “October is the likely date for the most substantial decision given the incoming data schedule, particularly on wages.” You can now all start your summer vacation now instead of waiting until August 25th.
Ian Lyngen and Aaron Kohli of BMO Capital Markets say September 7 is now the next date Draghi may saying something substantive. A key to market reaction will be whether he pins tapering to a shortage of bonds to buy or an improving economic outlook. They write:
Mario’s reluctance to give the market a sneak peek at any changes to the ECB’s bond buying program ahead of the September 7 meeting is certainly consistent with the central bank’s position of waiting until the fall to address the scarcity of EGBs available for QE. The ideal solution isn’t readily apparent outside of scaling back (again) the pace of purchases to match the realities of the European bond market. We’ll argue that it becomes as much about the way in which the policy change is communicated as much as the widely anticipated shift; characterizing less bond buying as a function of a decidedly more optimistic economic outlook carries different implications (read more bearish ones) than simply conceding the mechanics of limited supply.
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