ECB President Lagarde began the post-meeting press with a few minutes delay. Presentation began with readout of policy statement
Opening statement
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Create account Try a demo Download mobile app Download mobile app- ECB decided to change terms of TLTRO III programme. Programme had to be recalibrated to improve transmission of monetary policy
- TLTRO III terms will be changed, starting from November 23, 2022. Banks will have a chance for early repayment of loans
- Euro area economy slowed significantly and is likely to slow further in Q4 2022
- Terms of trade weight on incomes in euro area
- Labour market continued to perform well in Q3 2022 and unemployment rate remained at historic low
- Fiscal aid should be temporary and targeted at most vulnerable in order not to fuel inflation further
- Energy inflation is remaining a key driver of overall inflation
- Food inflation continues to rise due to high input costs
- Confidence indicators are falling
- Supply bottlenecks are easing
- Wage growth is picking-up
- Risks to the economy clearly skewed to the downside
- Risks to the inflation outlook primarily on the upside
- War in Ukraine remains risk to the outlook
- ECB made substantial progress in withdrawing support and accomodation
- Future decision will continue to be data-dependant and will be made on meeting-by-meeting basis
Q&A session
- ECB is not done with policy normalization
- Size of rate hikes will depend on data
- Rates will increase in the future
- QT was not discussed at today's meeting
- Principles of balance sheet reduction will be discussed in December
- Broad-based fiscal aid would counter ECB policy normalization
- Terminal rate may be beyond neutral
- Might hike rates at several more meetings
- Decision to change TLTRO terms was made for policy reasons
- TLTRO changes aimed at reducing liquidity and freeing-up collateral
- Many assumptions in September's downside scenario did not materialize (i.e. commodity prices did not continue to rise but fell instead)
Initially, EUR continued to move lower during Lagarde's press conference with EURUSD dropping further below parity. However, the main currency pair caught a bid later on and moved back to the 1.00 area. Indices moved higher with DE30 climbing above 13,200 pts. Market reaction shows that Lagarde's press conference is seen as dovish.
