13/07/2018 - ECB Prepares to End QE

EUR

Yesterday afternoon the minutes from the European Central Bank’s June meeting showed that there was a broad agreement within the ECB to prepare for the end of Quantitative Easing, while keeping sufficient flexibility.

The ECB guided markets for steady rates "through the summer" of 2019 at its meeting last month, when it also announced that it would shut a 2.6 trillion euro bond-buying program in December, ending its unprecedented stimulus scheme.

At this month’s meeting policymakers felt a need to stress that rates would move only if inflation continued to rise back toward the bank's target of almost 2 percent, the minutes showed. The assessment showed a broad support for dovish tapering after the outlook for growth and inflation showed a remarkable optimism. The ECB remained confident that the “economic expansion was expected to remain solid and broad-based, and to continue at a pace above potential.

USD

The Dollar struggled after US consumer prices rose less than expected in June amid falling utility prices and a record decline in hotel costs, even as the broader trend showed a pickup in annual inflation that may keep the Federal Reserve on track for gradual interest-rate hikes.

The CPI report showed hotel and motel rates fell 4.1 percent in June from the previous month, the biggest decline on record. Energy costs fell 0.3 percent in June amid declines in the costs of electricity and natural gas.

Several Fed officials have however indicated in remarks that a modest overshoot the inflation goal wouldn’t necessarily mean a more aggressive pace of interest-rate hikes, because for years price gains came in below expectations.

Key Announcements

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