What a difference a day makes.
Yesterday, Nowotny was mulling the different options rather than sovereign bond buys, which he called ‘one option’. In late 2014 he also clearly said Q1 was too soon for sovereign QE.
Today he said sovereign QE is a traditional central bank instrument and that the inflation outlook is significantly below goal. He’s now warning that the ECB balance sheet will effectively shrink if it does nothing.
Sounds like the QE naysayers (excluding the Germans) are getting on board but for traders it’s awfully tough to get a read on which way it’s going to go.
Update: His actual words — “In concrete terms, I believe it makes sense to do something in terms of monetary policy.” And – “Personally I believe that it would make sense to come to a decision rather earlier than later.” Very dovish.
