As expected, the ECB did not change its stance yesterday about forward guidance and the Governing Council confirmed the balance of risks as broadly balanced despite weaker momentum and risks surrounding the Euro zone.
The ECB prefers to wait for the new forecasts that will be released on December 13th before assessing if the slowdown is temporary or more structural. Mr. Draghi was confident in underlying inflation, supported by wage growth, trending higher towards the end of the year. Therefore, net purchases should end in December. There was no discussion on reinvestment policy. There were many questions on Italy during the press conference. Mr. Draghi repeated that there is no sign of contagion to the Euro zone. It is a fiscal problem and in a worst-case scenario, there remains an option: Outright Monetary Transactions (OMT).