European Central Bank will reassess stimulus measures in early 2015, and cuts growth and inflation forecasts again Markets fallThe Key PointsDraghi: We’ll consider stimulus plans in early 2015Press conference: highlights start here 3.52pm GMT The euro continues to push higher too, up almost 1% at $1.243. Alex Edwards, head of the corporate desk at UKForex, says Draghi was “less dovish” than traders had expected.The central bank did not announce any further liquidity measures and certainly didn’t indicate any immediate intentions to implement full blown QE. It’s a bit at odds with the most recent rhetoric and provides a boost to the euro, if only a temporary one. It wouldn’t surprising to see the ECB push the idea early next year, putting more pressure on the single currency. 3.48pm GMT European stock markets have all fallen sharply since it became clear that the ECB was divided over launching fresh stimulus measures.The French CAC has fallen 1.4%, Germany’s DAX is down 1%, while the Spanish and Italian indices are both down around 2%.There has been no evidence that the Bundesbank had softened its opposition to sovereign QE, in fact the contrary judging by recent coded messages. The markets had simply got ahead of themselves. Mr Draghi revealed there was plenty of discussion but no agreement, even on dates.Draghi might prefer consensus but if necessary he may be planning to outvote the Bundesbank and then argue that the politicians in Berlin and jurists in Karlsruhe need not get involved. That would really raises the stakes in the his poker game with the Germans and they will surely counter him. 3.28pm GMT As president Draghi heads off to swap presents and cards with the rest of the governing council (a lump of coal for Jens Weidmann?), let’s quickly recap.“The changes that have taken place in the price of oil are so meaningful -- just think that between June and today, the price of oil decreased by 30 percent in euro terms -- they need careful assessment ... We have to assess the direct effect, the indirect effect and whether there are going be second-round effects”“Yes indeed, ‘intended’ is different from ‘expected’. It’s not simply an expectation, it’s an intention, it’s not yet a target, it’s something in between. It was the vast majority of the members of the Governing Council, but obviously it was not unanimous.”“It’s an important monetary policy measure, it can be designed, I believe, to have consensus. But we have to remember that we have a mandate, and as I said before, we don’t tolerate prolonged deviations from our mandate.”Near-term ECB staff forecasts, as Draghi admitted, already off track given recent oil moves - likely negative in Q1. pic.twitter.com/FVyLcISdYC“In particular, the weak euro area growth momentum, along with high geopolitical risks, has the potential to dampen confidence and especially private investment.” 2.46pm GMT But so much fun. RT @ecb: Draghi: Would not be best use of our time to discuss things that are illegal 2.35pm GMT The press conference ends with Draghi slapping down the idea that a sovereign QE programme would be illegal.Not to pursue our mandate would be illegal, he replies. 2.33pm GMT Draghi is asked about the rise of popularity of Syriza in Greece, and Podemos in Spain.He says he’s not sure exactly what these parties want from the ECB."It is not entirely clear what changes they ask from our side" tells #Draghi to @syriza_gr and @ahorapodemos as he announces eventual QE 2.29pm GMT #ECB Draghi: We can not go against ECB treaty and do sovereign financing. 2.28pm GMT Would Draghi launch a QE programme even if a large minority of governing council members opposed it?It’s pointless to discuss what kind of majority would be needed until we know what kind of programme is being considered, he replies. 2.27pm GMT Isn’t QE illegal under European law, which rules out financing a member state’s debt?Draghi says that the ECB considered several kinds of QE, including buying sovereign debt. But that would be to meet its mandate, not to deliver monetary financing. That would not be acceptable, he smiles. 2.25pm GMT Could an ECB QE programme include other currencies?Draghi says the ECB doesn’t want to do that, as the exchange rate isn’t a target (that would take us into the realm of Currency Wars).So, QE will be (a) not gold. (b) denominated in €. (just for clarity)No unanimity on the Executive Board wrt balance sheet language - Lautenschlaeger, Mersch both likely dissenters. 2.20pm GMT The news that the ECB considered buying a wide range through quantitative easing (apart from gold!) has pulled the euro down a bit. 2.18pm GMT "Without being too specific in terms of the assets that would be included..." Too bad, that's the most important part. 2.18pm GMT What kind of assets did you discuss buying? US Treasuries, gold?My recollection is that we considered all assets, apart from gold, Draghi shoots back. 2.17pm GMT Is there time to persuade Germany of the merits of QE before the ECB’s March meeting? QE has worked in other countries, Draghi says. There is evidence that it could be effective.QE has been shown to be effective in US and UK, harder to say in Japan - Draghi#ECB Draghi: We don't need unanimity to agree on QE. Implies it will be agreed in case of prolongued lowflation. #euro 2.14pm GMT Would the ECB need a unanimous decision to launch a QE programme?No, says Draghi. It would be an important move, but we have a mandate to fulfill.Draghi: We don't need unanimity but it can be designed to have consensus 2.11pm GMT Up goes the euro, on the news that the ECB hasn’t taken any decisions on QE. Unintended consequences - lack of ECB urgency on QE will strengthen the euro. Up a cent already, back above $1.24: pic.twitter.com/gku6SGvwq9 2.11pm GMT Draghi’s vice-president Vítor Constâncio take the microphone. He says he was only expressing a “personal view” last week, when he said the ECB could launch full-blown QE in early 2015. 2.08pm GMT Why isn’t the ECB taking fresh action now, rather than faffing around until 2015? (I paraphrase): Draghi concedes it’s a fair question. The changes in the oil price are so big that the ECB needs to take time to assess its impact, both positive and negative. That’s a reason to think more. 2.05pm GMT Here’s the key section of Mario Draghi’s statement:....early next year the Governing Council will reassess the monetary stimulus achieved, the expansion of the balance sheet and the outlook for price developments. We will also evaluate the broader impact of recent oil price developments on medium-term inflation trends in the euro area. Should it become necessary to further address risks of too prolonged a period of low inflation, the Governing Council remains unanimous in its commitment to using additional unconventional instruments within its mandate. Introductory statement Mario Draghi to the press conference http://t.co/nTzE2uW8Us 2.03pm GMT Draghi is reiterating that the ECB will reassess the situation in early 2015, and examine the impact that the fall in the oil price has had on inflation, and inflation expectations. 2.00pm GMT The euro has strengthened since the press conference began - that suggests disappointment that Draghi hasn’t made a firmer commitment to QE (as monetary easing should weaken the currency). 2.00pm GMT A question about the ECB’s new offer of low-cost credit to banks (the TLTROs).It is very difficult to see what the full take-up of the TLTRO will be, Draghi replies; the conditions of the second wave of loans will be the same as the first. 1.56pm GMT Next question: What does Draghi think about EC president Jean-Claude Juncker’s new €310bn investment fund for European growth?Draghi says he supports it. It’s the only plan of its type we have right now, and we have great confidence in its success. 1.55pm GMT *DRAGHI SAYS ECB NOT UNANIMOUS ON WORDING ON ECB BALANCE SHEET 1.54pm GMT Blackstone also asks whether the ECB has hardened up its plan to expand the balance sheet to 2012 levels.Yes, Draghi replies - we have changed the phrasing from an “expected” expansion to an “intended one”. That’s a harder commitment.Draghi: Target Intended Expected. (we are currently at 'intended' and the Germans are not even backing that) 1.53pm GMT Brian Blackstone of the WSJ asks whether the ECB could decide whether to take the plunge into full-blown QE in seven weeks (it’s next meeting is in late January):On the first point, Draghi declines to say when the next decision will be taken. But he agrees that the ECB will have a lot of data to digest in January, including the slump in oil prices in the last week. 1.52pm GMT Onto questions.... 1.49pm GMT , KICK,DRAGHI,ROAD,CAN,DOWN 1.48pm GMT Draghi ends with his usual plea to eurozone governments to implement structural reforms, and to use all available scope for ‘growth friendly fiscal policies”. 1.48pm GMT The ECB now expects eurozone GDP to rise by just 0.8% this year, 1.0% in 2015 and 1.5% in 2016. That’s weakAnd it has cut its inflation forecasts in 2014 to just 0.5%, from 0.6%. 1.46pm GMT Draghi says the ECB’s growth and inflation forecasts have been revised down substantially; and he admits that these forecasts do not include the latest slump in oil prices. 1.45pm GMT So, the ECB won’t launch a government bond-buying programme today, but it might come before the spring...It sounds as though #Draghi will wish us a Merry Christmas and that we will find #QE under the tree in the New Year but not now! #ECBAs expected, a more explicit albeit conditional commitment to do more "in a timely manner". Sorry guys, no ECB QE for Christmas. 1.44pm GMT Onto the ECB’s new forecasts, and Draghi says the eurozone faces lower inflation and weaker GDP growth.He points to the fall in oil prices. 1.41pm GMT Draghi says the governing council remains unanimous that it will take further measures, if necessary. 1.40pm GMT INTERESTING.Draghi says that early next year the ECB will reassess the success of its existing stimulus programmes, and the impact of weak oil prices on the eurozone economy.Draghi: We will also evaluate the broader impact of recent oil price developments on medium-term inflation trends in the euro area 1.37pm GMT Onto the prepared statement. Draghi confirms that the ECB has left rates unchanged.The ECB has started purchasing covered bonds and asset-backed securities he says (yes we know that). 1.35pm GMT Draghi begins by welcoming the press to the new HQ, a project that dates back to the creation of the single currency union. 1.33pm GMT Mario Draghi has strode into the room, a few minutes behind schedule (for the second month running).This is the first press conference in the ECB’s new headquarters. 1.33pm GMT Where is Mr. Draghi? 1.28pm GMT Here’s a live feed of the ECB press conference - which I’ve also tried to add to the top of the blog. 1.16pm GMT The ECB press conference is one of the last set-piece events in the European economic calendar this year, so lets hope Mario Draghi is on his customary good form.Draghi Conference in 15 mins! #forex #news #ecb #draghi 1.13pm GMT Back in August, Mario Draghi identified inflation expectations as a key measure which the ECB would watch.This chart shows how they have fallen over the last four years, particularly in recent months.Dear Mr. #Draghi here is your one graph for this afternoon. #inflation expectations are coming down rapidly. pic.twitter.com/39tGINZ3Y5 1.05pm GMT ING economist Carsten Brzeski says president Draghi will probably reiterate the ECB’s determination to expand its balance sheet to the levels in 2012.That’s an extra trillion euros (from €2trn today).It's all about that bass...eh...balance sheet...Mario Draghi's favorite tune ahead of today's #ECB press conference. 1.03pm GMT All eyes will soon be on Frankfurt, says Daniel Sugarman, market strategist at ETX Capital:The markets will be watching events in Frankfurt closely...to see whether Mario Draghi will reveal any further details regarding Q.E measures to prevent another recession. 12.50pm GMT Monetary policy decisions: rates unchanged http://t.co/AaYQEAGcSS 12.49pm GMT The European Central Bank has voted to leave interest rates at their current record lows across the eurozone.No change in policy from the ECB. Draghi spotted picking out a Christmas tie 12.39pm GMT Next up, the European Central Bank’s announcement at 12.45pm GMT (1.45pm Frankfurt time).Again, the markets aren’t expecting any change in monetary policy at today’s meeting (but they’ve been proved wrong before). 12.22pm GMT Mark Miller, UK analyst at the Economist Intelligence Unit, predicts further inaction from the Bank of England:“The current period of subdued inflation pressures is dictating the path of UK monetary policy and low inflation seems likely to persist as we head into early 2015.We do not envisage an interest rate increase until well into the second half of next year” 12.08pm GMT BOE rates at 0.5%: 5 years, 9 months and counting... 12.07pm GMT We must wait almost two weeks for the minutes of today’s Bank of England meeting, to find out if the decision was unanimous. It probably wasn’t; in recent months, the MPC has split 7-2, and November’s minutes showed a range of views among the seven dovish members of the committee, suggesting some were close to voting to hike borrowing costs. 12.01pm GMT @BankofEngland maintains #BankRate at 0.5% and the size of the Asset Purchase Programme at £375 billion 12.00pm GMT To no-one’s surprise, the Bank of England has left UK interest rates at their current record low of 0.5% again.There’s also no change to its QE programme, and no statement. 11.52am GMT European consumers are among the most pessimistic about their financial security, in another nudge to the ECB to consider fresh stimulus today. Out Datablog editor, Alberto Nardelli, reports that European countries makes up six of the bottom eight countries in the latest Ipsos financial security monitor, a monthly survey carried out in 24 countries around the world. 11.36am GMT I missed this earlier; France’s unemployment rate has reached its joint-highest level on record.The jobless rate hit 10.4% in the third quarter of this year, up from 10.1% in Q2.French unemployment jumps to 10.4% in Q3, equaling euro era high: pic.twitter.com/c8ksSdaaDI 11.24am GMT There’s a danger that Mario Draghi could disappoint the markets today.Bonds could fall if the ECB chief doesn’t give a hint, at least, that sovereign bond-buying programme is possible (even though it might not do much good) “I don’t find it an attractive market at all because it is going to be entirely dominated in the near term by the implementation of a QE programme.”“If it does nothing but foreshadows the implementation without giving more details I would suggest the market is priced for that already.” 10.58am GMT The euro is bobbing around its lowest level since August 2012 today, at $1.2315.The Eurozone is struggling with low inflation at the moment, and it is often even failing to match the already low expectations that are forecast. Overall Eurozone Services PMI yesterday was at the lowest level since January, and retail sales figures undershot expectations. 10.44am GMT European bonds are pretty calm today, with prices down slightly. That doesn’t suggest investors suddenly expect a new ECB programme today:European government bond markets on Tradeweb this morning. pic.twitter.com/3DBLyiSQAxWith German and French yields at 0.8% and 1.2%, and Spanish and Italian yields at 2.1% and 2.3%, one could question whether there is any conceivable benefit from buying sovereign debt. The political obstacles would be high, and Draghi could expend energy for limited reward in trying to surmount them. 10.20am GMT A housekeeping note: this will be the first monthly press conference since the ECB moved to its new headquarters -- and it looks terribly swanky.First @ecb press conference in new building later today. Livestream later here http://t.co/7pHpnZHohc (in the meantime enjoy the new b-roll) 10.11am GMT Back to the European Central Bank’s meeting.Aengus Collins, lead analyst on the eurozone at Economist Intelligence Unit, says a sovereign QE programme would be “a political bridge too far”. “However, the fact that sovereign QE now dominates debate is an indicator of how damagingly dysfunctional economic policy-making is in the single currency area. Mario Draghi is doing his utmost to fulfil the bank’s de facto role as policy-maker of last resort, but with interest rates at the zero lower bound it is unreasonable to expect the ECB to get the euro zone economy up to escape velocity.“The recent announcement of a €3tn balance-sheet target was another helpful intervention from Mr Draghi, but it needs to be part of a much more concerted attempt to deliver a mix of fiscal, monetary and reforming policies appropriate to the dismally weak state of the bloc’s economy. That is something only political leaders are in a position to provide. Thus far, they are failing lamentably.” 10.03am GMT Σε εξέλιξη το διάγγελμα Putin προς τον ρωσικό λαό pic.twitter.com/zK9hibip5ZInsight into Putin's mind: says some countries would like Russia to be dismantled like Yugoslavia but Moscow wouldn't let it happen #Putin 10.01am GMT The Russian rouble has been fluctuating after president Vladimir Putin addressed the nation a few minutes ago.The rouble fell as Putin blamed Western governments for the Ukraine crisis, but rallied after he promised a string of business reforms, including an amnesty on capital returned to Russia from overseas and a freeze on some taxes.Putin: "We have to remove the restrictions on business as much as possible."Putin calls for an "amnesty" on capital returning to Russia, meaning if people repatriate their money, they won't face tax/legal questions.Putin on ruble: "The government knows who the speculators are." Have methods of acting against them. 9.32am GMT UK car sales jumped 8% year-on-year in November, in the 33rd consecutive month of rising sales.The Society of Motor Manufacturers and Traders credited rising consumer confidence in the UK; cheap credit, and the rise of deals where you effectively rent your new vehicle, are also factors, I think. 9.11am GMT Shares in Unilever have hit their highest level in a year, up 3%, after the consumer goods giant told investors it will spin off (churn?) its spreads business into a standalone unit. That includes kitchen staples such as Flora, Stork and I Can’t Believe It’s Not Butter; fastFT reckons private equity might be licking their lips.Unilever to spin off its spreads business http://t.co/2cjWtJinSr 8.55am GMT Investors will be watching to see how dovish Mario Draghi performs this afternoon, and whether he makes any promises about future QE.The main event of the day is the ECB meeting, almost universally expected to see no policy move. Mario Draghi’s final press conference of the year does afford an opportunity for him to go off piste however, something he has done before. 8.47am GMT Britain’s house price continues to cool, according to the latest figures from the Halifax building society.House price growth slowdown continues. In 3 months to Nov prices rose 8.2% y-o-y, down from 8.8% in Oct, says Halifax pic.twitter.com/TDRjECUFnY*DJ UK Halifax Nov House Prices +0.4% On Mo, +8.2% On Yr . #stampduty #AutumnStatement 8.27am GMT Back in the markets, shares in Ryanair have jumped almost 10% after it raised its profit forecast.The budget airline, which recently adopted a revolutionary policy of being nicer to its customers, reported a 22% increase in traffic in November.Now @Ryanair shares hit record high.Shares +10%...bet O'Leary's pleased he took leaf out of Carolyn McCall's book&got more customer-friendly 8.17am GMT Jamie Dimon, the boss of JPMorgan, has predicted that Europe’s economic weakness will drag on for years.“They have all the same structural issues that you read about of other countries, but it’s 17 nations -- and some of those structural issues have to be agreed upon in 17 parliaments and then by Brussels.”Doh! RT @Jeffrey_Black: Jamie #Dimon, prophesying on Europe's dim future, gets the number of euro countries wrong. http://t.co/Xvrdclbaxr 8.08am GMT Heads-up: our politics liveblogger Andrew Sparrow is tracking all the reaction to yesterday’s autumn statement here:Paul Johnson from IFS' verdict is that cuts will have to be 'gruesome'- will Osborne front up on that? #AutumnStatementLots of talk about #UK Autumn Statement but stand out for me is planned spending cuts over next 5yrs. Seem implausibly tough. Won’t happen?Asked about Osbo plan to slash spending to 1930s levels of GDP, Ed Balls tells #r4Today: "I'm absolutely not committed to that" 8.05am GMT Bill Blain, chief fixed income strategist at brokerage firm Mint Partners, reckons that the Governing Council won’t agree any dramatic new policies. He told clients:“Expectations are diminishing for anything spectacular at the this week’s meeting – except kicking that can down the road,” 8.00am GMT European stock markets are inching a little higher at the start of trading, as investors await central bank action this lunchtime.FTSE called to open +10pts at 6735 ahead of BoE + ECB policy updates. Focus on Draghi's hints/commitment (if any) at more stimulus 7.59am GMT Mario Draghi’s room for maneuver today is limited by the hawkish members of the governing council, who will argue that the current stimulus measures should be given a fair trial.So even though the new ECB staff forecasts on growth and inflation are likely to be disappointing, full-scale QE will probably be resisted.There should be some response to the weaker outlook, and the middle-ground solution might be adding corporate bonds to the asset purchases. That keeps the prospect of quantitative easing alive still.#ECB MT @johnodonnell21 Draghi will speak today but doubt are growing that he can reverse the #euro economic gloom http://t.co/EZaa74L6Ga 7.48am GMT There’s only a 5% chance of the ECB unveiling a full-blown government bond-buying programme today, says Chris Weston of IG. He also suggests it might announce plans to buy corporate bonds. This would increase the scope of assets the central bank can buy and, in turn, help them achieve a bigger balance sheet. 7.46am GMT Credit Agricole reckons the European Central Bank might drop some hints about a future sovereign QE programme at today’s meeting.“We will be looking at the exact wording of the introductory statement,”“If the reference to sovereign debt purchases appears in the statement, then it would be the clearest sign that the ECB is ready to deliver sooner rather than later, probably with a comfortable majority.”Crédit Agricole: no sovereign QE announcement by the ECB today,but a more formal, albeit conditional commitment to broader asset purchases 7.31am GMT Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.It is late 2019 and an election is looming. The Conservatives scraped a majority at the last election thanks to a timely boost to the housing market provided by George Osborne, who was rewarded for snatching victory from the jaws of defeat by succeeding David Cameron as prime minister.Osborne sits impassively in the Commons as his chancellor of the exchequer uses the last autumn statement of the 2015-20 parliament to boast that the government has met its manifesto pledge of balancing the books.Autumn Statement hangover as scale of coming spending cuts is considered. ECB ahead (will Draghi make hints or promises?). MPC snooze. Continue reading...
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