As feared, the ECB has done nothing, preferring the scalpel of verbal guidance to the bludgeon of actual policy action. Nevertheless, Signor Draghi has enhanced his guidance, noting that "We are resolute in our determination to maintain a high degree of monetary accommodation and to act swiftly if required...The Governing Council is unanimous in its commitment to using also
unconventional instruments within its mandate in order to cope
effectively with risks of a too prolonged period of low inflation...the possible repercussions of both geopolitical risks and exchange rate developments will be monitored closely."
* Raise the rhetoric on the level of commitment and urgency? Check!
* Suggest a broader set of tools to address the problem? Check!
* Promise to keep a watchful eye on undesired further developments? Check!
Dean Wormer Mario Draghi has put inflation on double secret probation!
Whether the ECB will be any more successful at banishing disinflation than Dean Wormer and the Omegas is an open question. That Draghi specifically cited the exchange rate is potentially an important innovation, and surely belies an underlying desire to see it print lower. As noted earlier, it's an open question whether they'll be successful.
That Draghi cited the relatively docile nature of money market forwards is probably as clear a sign as any that a meaningful sell-off at the front end could be a catalyst for action. Should 1y1y Eonia throw a toga party, therefore, a policy change will probably be in the offing.
As for the euro...it's been marked a bit lower on the day...but with an asset-purchase program still some time away (Draghi was at pains to describe the issue with bank lending versus capital markets as a conduit of credit), Macro Man has little faith that current weakness can be maintained.
* Raise the rhetoric on the level of commitment and urgency? Check!
* Suggest a broader set of tools to address the problem? Check!
* Promise to keep a watchful eye on undesired further developments? Check!
Whether the ECB will be any more successful at banishing disinflation than Dean Wormer and the Omegas is an open question. That Draghi specifically cited the exchange rate is potentially an important innovation, and surely belies an underlying desire to see it print lower. As noted earlier, it's an open question whether they'll be successful.
That Draghi cited the relatively docile nature of money market forwards is probably as clear a sign as any that a meaningful sell-off at the front end could be a catalyst for action. Should 1y1y Eonia throw a toga party, therefore, a policy change will probably be in the offing.
As for the euro...it's been marked a bit lower on the day...but with an asset-purchase program still some time away (Draghi was at pains to describe the issue with bank lending versus capital markets as a conduit of credit), Macro Man has little faith that current weakness can be maintained.