Does a few weeks' delay make a difference?
- Hopes that ECB President Draghi would own up to membership of over-easers anonymous were dashed by the press conference yesterday. There were hints that the ECB may not announce plans for tapering bond purchases until October of this year.
- It is worth remembering that policy today is supposed to influence the economy in 2019 as central bank policy has a 12-18-month lag. A few weeks' delay in announcing a tapering program is not, therefore, significant.
- The stronger euro should not be a reason to sway ECB thinking. The euro is still a cheap currency – the US dollar's correction from excessive strength is only partially completed. Moreover, as the dollar depends on international flows, and as international investors risk overreacting to US political events, there is little the ECB can do to sway things.
- The next focus for investors, as the economic news flow dries up, is clearly the Fed. The Fed is likely to stick to the signal of a quantitative and probably a monetary tightening in the second half of the year.