OPTIONS: Expiries for Mar21 NY cut 1000ET (Source DTCC)
* EUR/USD: $1.0785(E764mln), $1.0800(E1.2bln), $1.0900(E1.5bln) * USD/JPY: Y148.48-50($519mln), Y149...
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ECB: Cipollone Q&A: Rerouting Of China Trade Could Have Strong Inflation Impact
The final questions of the Cipollone event hosted by MNI:
- Q: Given all the uncertainty, how do you sit down and make a decision come the next meeting? It’s hard to make a decision when these things aren’t concrete, but there are some channels (e.g. confidence ) where it does have some reaction?
- A: We are still predicating the economic recovery on consumption, but this process is still slow. The real side is not very promising.
- If China gets strong tariffs, they must send their goods somewhere, probably in the Eurozone. With two effects: Reducing the demand for domestic goods, and dampening import prices. This has a strong impact on inflation.
- I don’t know what will happen with oil and gas prices. I want to see the work of my colleagues at the ECB and then we will come up with a decision (even though I am considered a dovish person).
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ECB: Cipollone Q&A: Non-Linear QT and Mon Pol Equivalence
Q: How shall we translate/compare the impact of QT with policy rate changes? Is this linear/does this change with time?
A: It's not linear. It will become less and less strong as we move forward. In some sense, QT and rate cuts do not contradict each other because we have been in a restrictive territory. So the two instruments moved in the same direction. It will become interesting when the two instruments start to diverge.
Q: Will the policy rate still be restrictive if cut to 2.50% in March?
A: We live in a world of tremendous uncertainty. I cannot say whether we will be in restrictive territory or not in a months time.
