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| ECB to end QE stimulus programme in December - business live | ECB to end QE stimulus programme in December - business live |
| (35 minutes later) | |
| Over in Athens MPs have just approved the last multi-bill of reforms the country will have to take before its bailout expires this summer. | |
| It means fresh austerity and economic reforms for Greece, as our correspondent Helena Smith reports. | |
| Final results saw 154 deputies vote in favour of the draft bill – which foresees more pension cuts, labour market regulations, health care measures and sell-offs in the energy sector – and 144 against. | |
| The ballot took place in an atmosphere of growing political drama in Athens following the decision of the main opposition conservative party to call a vote of no-confidence in prime minister Alexis Tsipras’ government over its handling of the Macedonia name row, and an accord unveiled earlier this week, that will see the Slavic state being renamed the Republic of North Macedonia. | |
| Addressing parliament, Tsipras said he welcomed the motion. | |
| Here’s Danielle Haralambous, UK Analyst at the Economist Intelligence Unit, on the ECB’s announcement and press conference: | |
| “Mr Draghi acknowledged that risks from an increase in protectionism and financial market volatility had become more prominent, but maintained a relatively positive view of the outlook, brushing off signs of softer economic growth in the euro zone that prompted quite a sizeable a downward revision to the ECB’s forecast for 2018, to 2.1% from 2.4% previously. However higher oil prices and rising domestic cost pressures meant that the bank’s forecasts for inflation went up to 1.7% in both 2018 and 2019, from 1.4% previously. | |
| Against this backdrop the ECB felt ready to announce moves towards a less accommodative policy stance, albeit not an overtly hawkish one. Principal payments from maturing securities under the asset purchase programme will continue to be reinvested, and the forward guidance on interest rates demonstrates that the bank is planning to keep policy loose for some time. Mr Draghi added that the ECB stands ready to adjust all of its instruments if necessary. | |
| We had expected the ECB’s net monthly asset purchases to be reduced in the final months of 2018 and now expect a first move towards policy normalisation in 2019, with an increase in the deposit rate, and a rise in the main refinancing rate in early 2020. The next rate hike will probably be delivered by the successor to Mr Draghi, whose term ends in October 2019.” | |
| Jan von Gerich, chief strategist at Nordea Markets, predicts that the ECB won’t raise interest rates until the end of next year: | Jan von Gerich, chief strategist at Nordea Markets, predicts that the ECB won’t raise interest rates until the end of next year: |
| The end of net purchases does not mark the end of very loose policy. In fact, Draghi sounded dovish today, and we still expect the first rate hike only in December 2019. Nevertheless, the peak in the balance sheet is close. https://t.co/Y2sYqoqbM7 pic.twitter.com/hma5gMcMGc | The end of net purchases does not mark the end of very loose policy. In fact, Draghi sounded dovish today, and we still expect the first rate hike only in December 2019. Nevertheless, the peak in the balance sheet is close. https://t.co/Y2sYqoqbM7 pic.twitter.com/hma5gMcMGc |
| Candice Bangsund, vice president and portfolio manager at Fiera Capital, says today’s meeting had something for hawks and doves. | Candice Bangsund, vice president and portfolio manager at Fiera Capital, says today’s meeting had something for hawks and doves. |
| “Despite political turmoil in the Eurozone’s periphery and a recent soft patch of economic results, the ECB has set the stage for an end of QE later this year. Indeed, for the hawks, the ECB announced that it will taper the pace of monthly asset purchases after September (from €30bn/month to €15bn/month) and then end the purchase program in December. | “Despite political turmoil in the Eurozone’s periphery and a recent soft patch of economic results, the ECB has set the stage for an end of QE later this year. Indeed, for the hawks, the ECB announced that it will taper the pace of monthly asset purchases after September (from €30bn/month to €15bn/month) and then end the purchase program in December. |
| “However, for the doves – the ECB tempered this stance somewhat by reiterating its pledge that interest rates will remain unchanged until the back-half of 2019 (“at least through the summer of 2019”) – which is slightly longer than markets were expecting.” | “However, for the doves – the ECB tempered this stance somewhat by reiterating its pledge that interest rates will remain unchanged until the back-half of 2019 (“at least through the summer of 2019”) – which is slightly longer than markets were expecting.” |
| And finally, Draghi denies that the ECB plotted against the new Italian government by stopping buying its bonds last month. | And finally, Draghi denies that the ECB plotted against the new Italian government by stopping buying its bonds last month. |
| There’s not conspiracy here, he insists. | There’s not conspiracy here, he insists. |
| Draghi on the 5 Star/League theory that the ECB caused the market turmoil in Italy in May: "No conspiracy here" (said with a wry smile) | Draghi on the 5 Star/League theory that the ECB caused the market turmoil in Italy in May: "No conspiracy here" (said with a wry smile) |
| That’s the end of the press conference. | That’s the end of the press conference. |
| Q: What impact will the US tariffs, and worries about a trade war, have on the Eurozone? | Q: What impact will the US tariffs, and worries about a trade war, have on the Eurozone? |
| Draghi says that the ECB’s latest economic forecasts do not include the effects of trade measures that have not been implemented yet. | Draghi says that the ECB’s latest economic forecasts do not include the effects of trade measures that have not been implemented yet. |
| They only include measures that have already been imposed, and the impact of these is pretty limited. | They only include measures that have already been imposed, and the impact of these is pretty limited. |
| Draghi then warns that trade discussions must take place within the “existing multilateral framework”. | Draghi then warns that trade discussions must take place within the “existing multilateral framework”. |
| That is as important as the nature of the measure under discussion, Draghi says sternly. | That is as important as the nature of the measure under discussion, Draghi says sternly. |
| Otherwise, great damage could be caused if the multilateral framework created after the end of the second world war, and has helped create prosperity since, is undermined, he concludes. | Otherwise, great damage could be caused if the multilateral framework created after the end of the second world war, and has helped create prosperity since, is undermined, he concludes. |
| Mario Draghi is declining to give more details about when eurozone interest rates might rise from their record lows. | Mario Draghi is declining to give more details about when eurozone interest rates might rise from their record lows. |
| It all depends when we achieve the necessary convergence, he says, adding tersely: | It all depends when we achieve the necessary convergence, he says, adding tersely: |
| “If ‘through the summer’ meant September [2019], we would have said September” | “If ‘through the summer’ meant September [2019], we would have said September” |
| Q: When might savers in the eurozone get some help from the ECB with an interest rate rise? | Q: When might savers in the eurozone get some help from the ECB with an interest rate rise? |
| Draghi hits back, saying that savers benefit from the eurozone recovery - which more than makes up from the impact of low interest rates. The balance is vastly positive, he insists. | Draghi hits back, saying that savers benefit from the eurozone recovery - which more than makes up from the impact of low interest rates. The balance is vastly positive, he insists. |
| Draghi famously declared in 2012 that he would do ‘whatever it takes’ to save the euro. | Draghi famously declared in 2012 that he would do ‘whatever it takes’ to save the euro. |
| He hasn’t lost that belief today, as he tells reporters that the euro is ‘irreversible’. He points out that 340 million people live in the eurozone, and more countries want to join. | He hasn’t lost that belief today, as he tells reporters that the euro is ‘irreversible’. He points out that 340 million people live in the eurozone, and more countries want to join. |
| Mario Draghi plays down the prospect that Italy creates a new eurozone crisis. | Mario Draghi plays down the prospect that Italy creates a new eurozone crisis. |
| He says there was little “contagion” from Italy, and little “redenomination risk” (ie, that Italy leaves the euro and returns to the lira) | He says there was little “contagion” from Italy, and little “redenomination risk” (ie, that Italy leaves the euro and returns to the lira) |
| Draghi also plays down the political drama that unfolded in Rome this year: | Draghi also plays down the political drama that unfolded in Rome this year: |
| We have 19 countries, we are bound to have 19 elections every now and then. | We have 19 countries, we are bound to have 19 elections every now and then. |
| The important thing is that political changes are discussed within the current eurozone treaties, Draghi says. | The important thing is that political changes are discussed within the current eurozone treaties, Draghi says. |
| Draghi says there has been much sacrifice and struggle in the eurozone, so it is important that the achievements achieved in recent years is not destroyed. | Draghi says there has been much sacrifice and struggle in the eurozone, so it is important that the achievements achieved in recent years is not destroyed. |
| Eventually #Draghi sends some heartfelt advice to Italian politicians to be careful with what they say and do, without mentioning #Italy of course. | Eventually #Draghi sends some heartfelt advice to Italian politicians to be careful with what they say and do, without mentioning #Italy of course. |
| #ECB’s Draghi says important that govt discussions, language don't destroy progress | #ECB’s Draghi says important that govt discussions, language don't destroy progress |
| A reporter (rightly) ignores the warning not to ask about the allegations that Latvia’s central bank chief Ilmars Rimsevics has sought bribes. | A reporter (rightly) ignores the warning not to ask about the allegations that Latvia’s central bank chief Ilmars Rimsevics has sought bribes. |
| Draghi refuses to comment about the case, but insists the ECB is not taking any sides. | Draghi refuses to comment about the case, but insists the ECB is not taking any sides. |
| Our mantra is to be patient, prudent, and persistent, declares Draghi. | Our mantra is to be patient, prudent, and persistent, declares Draghi. |
| He reveals that today’s decisions were unanimous. | He reveals that today’s decisions were unanimous. |
| The euro is falling more sharply as traders listen to Mario Draghi explain today’s decision. | The euro is falling more sharply as traders listen to Mario Draghi explain today’s decision. |
| It’s now down a whole cent against the US dollar, at $1.169. | It’s now down a whole cent against the US dollar, at $1.169. |
| The fall accelerated as Draghi warned about rising economic uncertainty, and reiterated that the ECB was in no rush to raise interest rates. | The fall accelerated as Draghi warned about rising economic uncertainty, and reiterated that the ECB was in no rush to raise interest rates. |
| Euro not liking what @ecb’s mario #draghi has to say today pic.twitter.com/y8WCssS8yp | Euro not liking what @ecb’s mario #draghi has to say today pic.twitter.com/y8WCssS8yp |
| A weak currency will not worry the ECB though -- it should help exporters, and keep inflation rising towards their target. | A weak currency will not worry the ECB though -- it should help exporters, and keep inflation rising towards their target. |
| Q: Why does the ECB think risks are broadly balanced? Where do you see upside risks? | Q: Why does the ECB think risks are broadly balanced? Where do you see upside risks? |
| Draghi says there is undeniably an increased risk in global political uncertainty [a downside risk]. | Draghi says there is undeniably an increased risk in global political uncertainty [a downside risk]. |
| But on growth, Draghi predicts “positive surprises” from the fiscal expansion in the United States, and - in the medium term - in the eurozone. | But on growth, Draghi predicts “positive surprises” from the fiscal expansion in the United States, and - in the medium term - in the eurozone. |
| Draghi talking about upside risks from fiscal expansion in the Eurozone... hmm from Italy perchance?! @senoj_erialc | Draghi talking about upside risks from fiscal expansion in the Eurozone... hmm from Italy perchance?! @senoj_erialc |
| Onto questions (after a warning to reporters not to mention the corruption allegations against Latvia’s central bank governor - who isn’t allowed into today’s press conference). | Onto questions (after a warning to reporters not to mention the corruption allegations against Latvia’s central bank governor - who isn’t allowed into today’s press conference). |
| Q: Do you expect to raise interest rates before you leave the ECB in October 2019? | Q: Do you expect to raise interest rates before you leave the ECB in October 2019? |
| Draghi says the ECB governing council didn’t discuss when they might raise interest rates, and then adds that economic uncertainty is rising. | Draghi says the ECB governing council didn’t discuss when they might raise interest rates, and then adds that economic uncertainty is rising. |
| He points out that eurozone growth slowed to 0.4% in the first quarter of 2018, down from 0.7% in the last quarter of 2017. | He points out that eurozone growth slowed to 0.4% in the first quarter of 2018, down from 0.7% in the last quarter of 2017. |
| Draghi says "We didn't discuss when to raise rates." Reiterates the statement language that they expect to keep rates unchanged until summer 2019. @ecb | Draghi says "We didn't discuss when to raise rates." Reiterates the statement language that they expect to keep rates unchanged until summer 2019. @ecb |
| Draghi ends his statement by calling on eurozone politicians to up their game. | Draghi ends his statement by calling on eurozone politicians to up their game. |
| Draghi says the implementation of structural reforms in euro area countries needs to be “substantially stepped up” to increase resilience, reduce structural unemployment and boost euro area productivity and growth potential. | Draghi says the implementation of structural reforms in euro area countries needs to be “substantially stepped up” to increase resilience, reduce structural unemployment and boost euro area productivity and growth potential. |
| He also calls for eurozone countries to rebuild their “fiscal buffers”, and appears to single out Italy, saying: | He also calls for eurozone countries to rebuild their “fiscal buffers”, and appears to single out Italy, saying: |
| This is particularly important in countries where government debt remains high. | This is particularly important in countries where government debt remains high. |
| That looks like a warning shot to the new Italian government not to boost government spending and cut taxes. | That looks like a warning shot to the new Italian government not to boost government spending and cut taxes. |