Quantitative easing will not go beyond 2018. The ECB communicated it today, announcing that Qe will end in December and that from October bond purchases will be reduced to 15 billion euros a month. It will therefore continue at a rate of 30 billion euros per month until the end of September 2018. The instrument launched by the European Central Bank in March 2015 to counter fears of deflation and to accelerate the exit from the great crisis in the Eurozone is therefore coming to an end , as expected even if it was thought that it could continue in the first months of 2019 as well. The end of the purchase of government bonds and the expansive policy will inevitably leave room, progressively, for an increase in interest rates. But not for now: the meeting, held in Riga in Latvia and not in the usual location in Frankfurt, he also confirmed that interest rates remain unchanged for now, as expected. “Interest rates will remain at current levels at least until the summer of 2019, and in any case as long as necessary to ensure that the evolution of inflation remains in line with current expectations of a sustained path”, Draghi explained.
The rate hike operation, on the other hand, has already been undertaken several months ago by the Federal Reserve, which just yesterday raised the reference rate further by a quarter of a percentage point, to 2%. After the news released by the ECB, the Milan Stock Exchange turned positive: the morning had been very careful pending the decision of the central institute, then the turning point around 14 pm, shortly before Mario Draghi's speech: some bank stocks dragging the Ftse Mib, but also Ferrari and FCA, while energy stocks remain in the red, with Italgas bringing up the rear after the publication of the plan yesterday. When Draghi started speaking at 14,30 pm, Piazza Affari continued its ascent, settling firmly above 22.000 points. However, the banks remained in difficulty (with the exception of Bper, which is indeed among the best stocks) and the Ftse Mib remained linked to some industrial stocks such as Prysmian, FCA and Ferrari. The other European lists also rose, while the euro fell which after a brief flare-up to 1,1852 lost more than a figure in just a few minutes, reaching 1,17189. “Discussing the existence of something that is irreversible only creates damage and is useless. The euro is irreversible because people like it“, added Draghi about the single currency, then sending a further not too encrypted message to the new government: “I want to underline how in May the purchases of Italian bonds amounted to 3,6 billion euros, higher than the 3,4 billion in March and January. So there is no conspiracy."
However, Draghi was keen to underline monetary policy, “it's not over. Monetary stimulus is still needed to maintain prices and inflation. Support will continue to be supported by QE through the end of the year, reinvestment activity and interest rates." The president of the ECB, whose mandate will expire at the end of 2019, then commented on the economic context: “Temporary factors, supply-side shocks, trade disputes and much more, are all elements that have weighed on the growth which in any case continues to stay solid. Uncertainty related to global factors such as rising protectionism has become more evident: the risk of an increase in volatility needs monitoring", warned Draghi, who also announced that the outlook for the Eurozone economy was revised downwards for 2018, but "remained unchanged for the other two years subsequent. +2,1% in 2018, +1,9% in 2019 and +1,7% in 2020”. On the other hand, the forecasts on inflation have risen: “The outlook has mainly been revised upwards due to the price of oil, and with particular reference to 2018 and 2019. Growth will be 1,7% in 2018, 2019 and 2020″, argued the number one of the Eurotower.
(Article updated at 16.15pm)
