28 Nov 2014
ECB Plausible outcomes – RBS
FXStreet (Guatemala) - Analysts at RBS gave us a number of Plausible outcomes for the ECB meeting in December.
Key Quotes:
“The truth is there are a number of plausible outcomes in next week's ECB meeting. Before we get to the details, a quick summary is in order”.
“Tease: The Council does not act but suggests that more action could be on its way in the near future, where that suggestion may or may not explicitly identify sovereign bond purchases as a logical part of the next iteration in the policy response”.
“Traffic light: The Council does not act but goes 'old school' and signals that more action is more or less inevitable in the near future, where that signal may or may not explicitly identify sovereign bond purchases as a logical part of the next iteration in the policy response”.
“Tweak: The Council adjusts its current programmes – the TLTROs (increased eligibility and no fee) and the scope of its purchase programmes (incorporating corporate bonds) – to enhance their likely impact on the balance sheet”.
“Tough talk: The Council changes its forward guidance on the quantity of central bank money – quantifying the flow of purchases and the rate of balance sheet expansion – as a means to increase the credibility of the Council's balance sheet aspiration, with an implicit commitment to expand the composition of purchases (i.e., to include sovereign paper) if the current programmes prove insufficient”.
“Transform: The Council unveils a major new policy response which has a significant impact on the policy stance. By far the most likely here is a sovereign purchase programme, but in theory a radical (Odyssean) approach to the forward guidance on the price of central bank money could also do the trick”.
“Tidy up: The Council adjusts the Eurosystem's market operations to accommodate the transition to stimulus by large scale asset purchase programmes. In particular, the Council introduces the (negative deposit rate) tax free allowances we discussed back in September”.
Key Quotes:
“The truth is there are a number of plausible outcomes in next week's ECB meeting. Before we get to the details, a quick summary is in order”.
“Tease: The Council does not act but suggests that more action could be on its way in the near future, where that suggestion may or may not explicitly identify sovereign bond purchases as a logical part of the next iteration in the policy response”.
“Traffic light: The Council does not act but goes 'old school' and signals that more action is more or less inevitable in the near future, where that signal may or may not explicitly identify sovereign bond purchases as a logical part of the next iteration in the policy response”.
“Tweak: The Council adjusts its current programmes – the TLTROs (increased eligibility and no fee) and the scope of its purchase programmes (incorporating corporate bonds) – to enhance their likely impact on the balance sheet”.
“Tough talk: The Council changes its forward guidance on the quantity of central bank money – quantifying the flow of purchases and the rate of balance sheet expansion – as a means to increase the credibility of the Council's balance sheet aspiration, with an implicit commitment to expand the composition of purchases (i.e., to include sovereign paper) if the current programmes prove insufficient”.
“Transform: The Council unveils a major new policy response which has a significant impact on the policy stance. By far the most likely here is a sovereign purchase programme, but in theory a radical (Odyssean) approach to the forward guidance on the price of central bank money could also do the trick”.
“Tidy up: The Council adjusts the Eurosystem's market operations to accommodate the transition to stimulus by large scale asset purchase programmes. In particular, the Council introduces the (negative deposit rate) tax free allowances we discussed back in September”.