With regards to the ECB meeting, analysts at Nomura explained that, in short, all was as expected, although, there was, however, some acknowledgement in the press conference that the economic picture had darkened.
Key Quotes:
“There was, however, some acknowledgment in the press conference that the economic picture had darkened. Mr Draghi described the incoming data as being “somewhat weaker”, but still consistent with the ECB’s view of an ongoing broad expansion of the euro area economy.”
“The ECB President also seemed cheered by this week’s Bank Lending Survey, which showed demand for loans increasing across all loan categories. The ECB’s view of the risks to euro area growth remained the same as in September, i.e. “broadly balanced”. Mr Draghi pointed to a number of “specific” factors for the slowdown in growth, including the German auto sector, trade uncertainties and Brexit, and argued that what we are seeing is more a move in growth back towards trend from what was an especially stellar performance last year. As for financial market contagion from the Italian fiscal situation, Mr Draghi argued that if there had been any spillovers they were limited, with higher bond yield spreads in some other countries possibly having been generated justifiably by idiosyncratic events there (think Spain, for example).”
“The ECB said it was still confident of a “sustained convergence” in inflation to its aim, despite weaker core inflation prints recently. To that end, the ECB will publish its inflation forecasts to 2021 for the first time at the December meeting. The explanation was in no small part focused on the rise in wage inflation – particularly negotiated wages, where faster growth was more likely to prove sustainable than had it been caused by wage drift. This is something we touched on in a recent article discussing the inflationary implications of stronger wage growth.”
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