Here’s the Wall Street Journal with their latest pithy ‘5 things’ piece … this time the 5 things to watch in the ECBs December meeting
- Expectations are running high that the ECB will pull the trigger on large-scale government bond purchases, known as quantitative easing or QE, in coming months … the meeting should provide more clues about how close the ECB is to launching
OK, on with the 5 things:
1. ECB President Mario Draghi’s opening press statement will be much more important than usual.
“The acid test must be what the introductory statement says,” RBS economist Richard Barwell said. If it echoes Mr. Draghi’s recent remarks, “that would be the clearest signal that he has the numbers” for QE.
2. Is there an explicit reference to possible government bond purchases in the ECB statement, and how muchDraghi dwells on this option during his Q&A. This would also send a powerful signal that the ECB is getting closer to this step.
3. Draghi could press forward with QE with a simple majority of the ECB’s 24-member governing council. But for a policy so controversial–especially in Germany, whose top ECB officials have expressed deep skepticism–the bigger the majority the better. Any signal from Mr. Draghi on how significant a majority he feels he needs would be telling.
4. The ECB will release fresh inflation forecasts. .. the outlook for 2015 will likely be cut
5. Oil prices have plunged to multiyear lows… which should put inflation even further below the ECB’s target and weaken inflation expectations. But at the same time it helps the economy by raising disposable incomes. Whether Mr. Draghi emphasizes the good or bad side to oil’s slide will give clues to how aggressive he thinks the ECB needs to be.
