The ECB may not have announced any more policy easing today, or even indicated that further stimulus is likely in the coming months, but Mario Draghi did a fine job in talking up bond yields in the euro area. Perhaps a sly attempt to free up more assets eligible for purchase under the current quantitative easing structure.
There were two main takeaways from today’s ECB decision and press conference. The first is that inflation and growth forecasts were lowered but only marginally reflecting the negative, albeit less so than previously expected, impact of the Brexit vote. The other is that the committee has been given a full mandate to redesign quantitative easing. In other words, the central bank is approaching the point at which it will no longer be possible to carry out QE in its current form, but it is looking at ways to overcome it.
That would explain why they did not announce an extension to the QE program beyond March 2017 today because they must first decide how the program will be adapted. That is not to say it won’t be. In fact, Draghi made it clear that QE will continue, stating that it will run until or beyond the current expiry if necessary. He also claimed that it will run until inflation path is consistent with its goal, which it currently isn’t close to.
All things considered, today was not the event it was built up to be. However, it is clear that the ECB is working towards some significant changes to the QE program, even if that doesn’t necessarily mean more stimulus in the short term. Whether that takes three or six months isn’t really too important.