HELSINKI (MNI) – The market’s interpretation of comments by
European Central Bank President Jean-Claude Trichet following the ECB’s
rate setting meeting on Thursday was overly dovish, Governing Council
member Ewald Nowotny said Friday.
Trichet’s comments pushed the euro 2% lower. The Eonia swap curve
also pushed back rate hike expectations by two months after Trichet
spoke, almost completely ruling out a June hike and no longer fully
pricing in a move in July as it had before Thursday’s press conference.
The reaction is “definitely” an “overinterpretation,” Nowotny said.
“There can be no idea about being dovish,” Nowotny stressed. His
comments are all the more revealing since he is considered one of the
doves on the Council.
Nowotny’s comments slammed June Bunds into reverse, causing them
briefly to shed the morning’s gains and move into negative territory.
But the selloff in commodities later neutralized that effect and Bunds
have since recovered. Rate expectations are back where they were after
the press conference Thursday — namely, September for the next hike
and December for the one after that.
“What the ECB council decided yesterday was that we want to get
full information especially about the medium-term inflation
developments. That means also the perspective for 2012,” Nowotny said,
explaining the decision not to signal a rate hike for June.
“In June we will have the new ECB forecasts, and that is the time
to decide. But this should not be interpreted as a dovish stance in a
any way,” Nowotny said.
Nowotny also said that the Council wants to keep the central bank’s
Securities and Markets Programme running but use it as little as
possible.
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–Frankfurt bureau tel.: +49-69-720142. Email: frankfurt@marketnews.com
[TOPICS: MT$$$$,M$$CR$,MGX$$$,M$$EC$,M$X$$$]
