An opinion piece from Mohamed A. El-Erian who says the European Central Bank dovishness went beyond what markets had expected.
ICYMI the news from the ECB overnight was very dovish indeed, thankfully we had a heads up the pervious day so as surprises go this one was not too unexpected 9if that makes sense).
On Wednesday:
And, overnight:
- Draghi Q&A: There no discussion about restarting QE or cutting deposit rate
- Draghi Q&A: New measures are adding accommodation
- ECB forecasts: 2019 GDP at 1.1% vs 1.7% in January forecast
- Draghi opening statement: ECB decision aimed at lifting inflation
- ECB leaves key rates unchanged as expected
OK, El Erian:
Markets generally expected a dovish signal from the ECB given the projected flagging of euro zone growth and inflation, but they didn't expect it to come as soon or be as comprehensive.
They will likely have three major takeaways:
- An ECB policy flip-flop that is as dramatic as the Federal Reserve's in January.
- A notable weakening in global economic momentum and the lowering of expectations that other European policy-making bodies will step up to their pro-growth policy responsibilities this year.
- Support for the notion that, 10 years after stocks hit their lows during the global financial crisis, traders and investors can still rely on exceptional liquidity support from systemically important central banks.
Here is the link for more (Australian Financial Review might be gated)
