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ECB making significant calls – RBS

FXStreet (Guatemala) - Analysts at RBS noted the significance of today’s comments from Draghi.

Key Quotes:

“President Draghi's speech today included an important statement about the Council's monetary strategy – the Council does not have the luxury or the latitude to remain impassive in the face of the current episode of low inflation; the ECB must act without delay – and outlined the way in which asset purchases could be deployed to reflate a bank-centric economy”.

“A more muscular monetary policy response is a clear nod in the direction of more sooner on asset purchases and that in turn raises the prospect of sovereign bond purchases”.

“However, we are not quite ready to pencil in sovereign bond purchases into our forecast, given the resistance of a powerful minority within the Council who are concerned about the unintended consequences of sovereign bond purchases, but it is clearly a close call”.

“Alongside tweaks to the TLTROs and an announcement of corporate bond purchases we now expect fresh explicit and implicit forward guidance from the Council in December raising expectations of the ultimate size, pace and composition of ECB asset purchases, and by extension, that sovereign bond purchases are now a realistic proposition”.

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