FXStreet (Delhi) – David Simmonds, Research Analyst at RBS, notes that the ECB heavyweights have stepped up coordinated, dovish rhetoric ahead of the December 3 meeting, suggesting that the further action is in store in its forthcoming meet.
Key Quotes
“Chief Economist Praet is prominent, stressing again the importance of inflation expectations: ECB regards any decline in inflation expectations (and rise in real rates) as something fiercely to resist.”
“What ECB badly needs is lower real rates. ECB is worried too about credibility risks around its inability to return inflation to 2% target. A strategy of constantly rolling that ‘return to target’ forecast perennially into the future is reaching the end of the credibility road.”
“Rarely has a central bank signalled pending policy easing more clearly. Some of this is already seen and discounted. Still, we think Draghi can still ‘out-dove’ a market which no longer knows where the lower bound is on (more negative) Euro policy rates. In the global currency fracas, the ECB needs EUR to fall further and intends to make sure it does. Its credibility is at stake. It says so itself.”
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