A Wall Street Journal article … in (very) brief:
- The ECB’s plan to buy €60 billion in sovereign bonds each month until “at least” September 2016 is far bigger and more open-ended than the single year’s worth of €50 billion per month that most had expected
- it’s not hard to imagine central bankers taking further actions …
- The worry is that ECB move has put other central banks toward a tipping point, where a tit-for-tat series of currency-weakening policy changes turns into something of a cycle. If so, it would be the latest in a line of such moves, with the U.S. Federal Reserve, the Bank of Japan and the Bank of England all playing their part to create what must by now be designated as a de facto currency war.
The full article is here, not gated: The ECB Just Changed the Ball Game for Other Central Banks
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The next RBNZ meeting is on January 29. Westpac said earlier today they expect the bank to adopt a neutral bias at this meeting.
Next RBA meeting is February 4. This aggressive action from the ECB will raise concerns about the potential for flows into the Australian dollar. Is that enough to tip the scales to an overt easing bias, if not an aggressive cut? (I’ll reiterate … again … if that’s not a tautology … I think a cut in February is unlikely … but after the ECB last night my level of comfort in that call has declined. OIS pricing remains at 32% where it was late yesterday).
