Despite no new serious asset purchases, Draghi and his team did indicate specifically that these same interest rates would remain at or lower than the current rates well past the horizon of the ECB’s net asset purchases.
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“There was nothing in or between the lines which made us change our mind on what’s coming: We expect the European Central Bank to announce the extension of the asset purchase programme by at least six months in December”, Nordea said.
Draghi was questioned by reporters about the possibility of expanding quantitative easing but refrained from providing any hints. “The main message doesn’t seem all that different”.
The revisions to the macroeconomic outlook was not substantial to warrant a decision to act, he noted.
It would continue QE beyond that date, if required. “The committees have a full mandate”.
Some analysts, however, think the bank is more likely to postpone action to its October or December meetings, or not act at all.
“Fiscal policies should also support the economic recovery”, he said, repeating a message given by central bankers at the annual Jackson Hole gathering this year but which has prompted little response so far in Europe.
Mr Draghi also cut eurozone growth expectations for 2017 and 2018, from 1.7% to 1.6%, although the Bank raised forecasts for 2016 from 1.6% to 1.7%.
“The President of the European Central Bank will comment on the considerations underlying these decisions at a press conference starting at 14:30 CET today”.
Without supportive M&A news of their own, European stock markets underperformed London. The Nasdaq composite fell 16 points, or 0.3 percent, to 5,267. The FTSE 250 ended up 0.7%, or 132.89 points, at 18,193.13, and the AIM All-Share closed up 0.9%, or 7.17 points, at 808.87. Private equity firm TPG will invest $1.1 billion in the new company and own a majority stake. On Wall Street, the future for the Dow Jones industrial average rose 0.1 percent and that for the Standard & Poor’s 500 advanced 0.2 percent.
J Wiley said traditional book publishing remained “under considerable market pressure, particularly in Education”.
ANALYST’S TAKE: “Global equities have been climbing to a 12-month high recently, and are showing signs of fatigue”, said Bernard Aw of IG in a report.
“Pearson [was] already weak for the quarter to end June but this is evidence of continuing year-on-year weakness in gross sales (sending off the books to bookstores) in one of the “big months” of the year”, Barclays said.
“The European markets responded to “Brexit” with encouraging resilience. while the bloc’s July data showed that “Brexit” risks have not materialized as feared, at least not yet”, he said.
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“The general tone of weighing the costs and benefits were in Governor Kuroda’s comments as well”, said Shinichiro Kadota, senior FX and yen rates strategist for Barclays in Tokyo. Policy makers fear that households and businesses will grow used to very low inflation rates and adjust their behavior accordingly, with workers settling for lower wage rises than in the past and companies reluctant to raise their prices-developments that policy makers refer to as “second round effects”. It added 72 cents on Wednesday to close at $47.98.
