ECB: Governing Council's economic assessment had improved - BBH

In view of analysts at BBH, it had seemed clear at the December ECB meeting that the Governing Council's economic assessment had improved.  

Key Quotes

“As the asset purchases were going to be slowed, greater reliance would be placed on forward guidance.  A number of officials seemed to confirm this in their public speeches.  What may have caught some observers off-guard was the change in the communication could happen earlier and seems to have broader support than previously understood.”

“Draghi said at his last press conference that “By and large the overall discussion today reflected increasing confidence that we have in the convergence of inflation towards a self-sustained inflation path in the medium term and towards our objective."  Despite this confidence, Draghi made it clear, and the record of the meeting underscored, that the sequencing remains intact.  Only sometime after the asset purchases stop will the ECB hike rates.”

“The asset purchases are another key issue.  Some of the hawks have been pushing for a set date to end the purchases.  However, a commitment to do so at a future date (i.e., September) would, in effect, decouple the asset purchases from inflation.  It became date-dependent not data-dependent, to borrow jargon used in the US.  The ECB record of the meeting confirms what Draghi said at the press conference:  the vast majority of the Governing Council "wants to keep, to retain the open-endedness feature of the asset purchase program as it's been designed in the last monetary policy council.”