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Mario Draghi hails eurozone recovery after halving stimulus programme to €30bn per month - business live Mario Draghi hails eurozone recovery after halving stimulus programme to €30bn per month - business live
(35 minutes later)
2.18pm BST
14:18
Draghi: We're watching Catalonia independence very closely
Q: Is political uncertainty in Catalonia a risk to financial stability in Spain, and in the euro area at a whole?
Mario Draghi says the ECB is following developments with “great attention”, but it is “very difficult to comment on developments that change every day”.
To conclude now that there will be financial stability risks would be premature. We have to see what will happen....
2.15pm BST
14:15
Q: Why has the ECB decided to keep expanding its asset purchase programme, at a time when the US Federal Reserve is cutting its own QE scheme?
Draghi doesn’t accept the suggestion that the ECB is wrong to keep buying bonds.
The US recovery is “way more advanced” than in the eurozone, meaning Europe’s inflation outlook is “way behind”, he says firmly.
2.08pm BST
14:08
Some reaction to Draghi’s comments:
'communication has been pretty effective' - Draghi pic.twitter.com/4HTgkZ8P6N
#ECB decision not unanimous. Not a surprise. I guess some have issue with length and open-ended. Majority went for open-ended, so not all!!
2.07pm BST
14:07
QE decision was not unanimous
Q: Was today’s decision unanimous?
No, there were different viewpoints, Draghi replies.
He says there was a “broad consensus on several issues, and a large majority on other issues.”
2.05pm BST
14:05
Q: How did the ECB go about preparing the public for today’s changes?
My understanding is that the market reaction was pretty muted, Draghi replies, even though the policy announcement was fairly important.
That shows that our communication was pretty effective.
2.03pm BST
14:03
Draghi says there are global factors influencing inflation...but the ECB is focused on the factors closer to home, which it can influence.
He points out that the eurozone has created more than seven million jobs in the last four years - a sign that his policies are bearing fruit.
2.00pm BST
14:00
Draghi is hammering home that the ECB will continue to reinvest the stock of existing assets bought under QE since 2015.
This has become “more and more important” as we’ve bought “a lot of bonds” smiles Draghi:
Draghi: The stock of purchased assets has become more and more important
When I announced the reinvestment policy in December 2015 "there was no reaction", says #Draghi with a very telling smile.
The ECB has bought something like two trillion euros of bonds since it plunged into QE in 2015. Draghi’s point is that the programme will still have a major impact on the economy, as the ECB plans to buy new bonds when its existing holdings mature.
So there are no plans to start cutting the size of the programme - something the US Federal Reserve is just starting to do.
1.52pm BST
13:52
#Draghi: "atmosphere was positive in governing council" (growth side) "different on inflation" (energy prices) #ECB pic.twitter.com/cnaysxRdU6
1.52pm BST
13:52
Q: Did you discuss alternative courses of action, before deciding to cut the pace of the APP to €30bn per month?
No, says Draghi. The “atmosphere was pretty positive” at today’s meeting, thanks to the increase in employment across the eurozone and rising wages.
The discussion thus ‘converged’ on the idea of halving the pace of the QE programme, and running for at least another nine months, although there were “some differences” about the details.
1.49pm BST
13:49
Draghi's Q&A begins
Onto questions.
Q: Did the ECB discuss changing the composition of the assets bought under your stimulus programme?
No, Draghi replies. But the press get more details later today on how the asset purchase programme will evolve, and re-invest its assets (as bonds mature)
1.47pm BST
13:47
Mario Draghi then issues his tradition call on eurozone politicians to do better.
In order to reap the full benefits from our monetary policy, other parties must also act, he says.
That includes “substantially” speeding up the implementation of structural reforms in “all eurozone countries”.
Draghi also calls for “more growth-friendly” fiscal politics across the eurozone.
1.43pm BST1.43pm BST
13:4313:43
Economic growth in the eurozone continued “unabated”, declares Draghi proudly.Economic growth in the eurozone continued “unabated”, declares Draghi proudly.
He says there has been an upswing in business investment. Construction investment has also improved, and eurozone exports are benefitting from the improved picture in the global economy.He says there has been an upswing in business investment. Construction investment has also improved, and eurozone exports are benefitting from the improved picture in the global economy.
Draghi says eurozone growth has continued "unabated." New word in his vocabulary.Draghi says eurozone growth has continued "unabated." New word in his vocabulary.
Draghi talking about the eurozone economic recovery like a proud dadDraghi talking about the eurozone economic recovery like a proud dad
But.... there are also downside risks, Draghi continues, including ‘global factors’ and ‘foreign exchange’ effects (ie, the recent strengthening of the euro).But.... there are also downside risks, Draghi continues, including ‘global factors’ and ‘foreign exchange’ effects (ie, the recent strengthening of the euro).
1.39pm BST1.39pm BST
13:3913:39
Draghi is talking about how the ECB has ‘recalibrated’ its bond-purchase programme.Draghi is talking about how the ECB has ‘recalibrated’ its bond-purchase programme.
It's recalibration and not tapering! #ECB #Draghi #QE #EURIt's recalibration and not tapering! #ECB #Draghi #QE #EUR
1.38pm BST1.38pm BST
13:3813:38
Turning to the economic picture, Draghi says that domestic prices pressures are still muted.Turning to the economic picture, Draghi says that domestic prices pressures are still muted.
Thus, “continued monetary policy support” is needed to underpin the economic outlook and keep inflation on track.Thus, “continued monetary policy support” is needed to underpin the economic outlook and keep inflation on track.
1.37pm BST1.37pm BST
13:3713:37
Draghi's press conference beginsDraghi's press conference begins
Mario Draghi begins by telling reporters that his governing council conducted a “thorough” analysis of the outlook for inflation in the eurozone today.Mario Draghi begins by telling reporters that his governing council conducted a “thorough” analysis of the outlook for inflation in the eurozone today.
Draghi confirms that the ECB decided to leave interest rates at their current record low, and expects to leave borrowing costs at these levels for an extended period.Draghi confirms that the ECB decided to leave interest rates at their current record low, and expects to leave borrowing costs at these levels for an extended period.
He also confirms that the ECB will maintain its QE programme for another nine months, at a pace of €30bn per month, “or beyond if necessary”.He also confirms that the ECB will maintain its QE programme for another nine months, at a pace of €30bn per month, “or beyond if necessary”.
The ECB stands ready to increase the asset purchase programme in terms of size and or duration if needed, he adds.The ECB stands ready to increase the asset purchase programme in terms of size and or duration if needed, he adds.
Speaking particularly crisply, Draghi concludes:Speaking particularly crisply, Draghi concludes:
Today’s monetary policy decisions were taken to preserve the very favourable financing conditions that are still needed for a sustained return of inflation to levels that are close to, but below 2%.Today’s monetary policy decisions were taken to preserve the very favourable financing conditions that are still needed for a sustained return of inflation to levels that are close to, but below 2%.
UpdatedUpdated
at 1.44pm BSTat 1.44pm BST
1.33pm BST1.33pm BST
13:3313:33
1.30pm BST1.30pm BST
13:3013:30
Mario Draghi's press conference - live feedMario Draghi's press conference - live feed
Over in Frankfurt, ECB president Mario Draghi is explaining today’s decisions to the press pack.Over in Frankfurt, ECB president Mario Draghi is explaining today’s decisions to the press pack.
You can watch it live here:You can watch it live here:
1.18pm BST1.18pm BST
13:1813:18
Anna Stupnytska, global economist at Fidelity International, reckons the ECB was right to maintain its QE programme for another nine months.Anna Stupnytska, global economist at Fidelity International, reckons the ECB was right to maintain its QE programme for another nine months.
She writes:She writes:
“The Euro area recovery is certainly becoming more entrenched, with broad-based growth across countries and sectors of the economy. The euro strength seen so far is unlikely to derail the growth story or pave way for a return of deflationary worries.“The Euro area recovery is certainly becoming more entrenched, with broad-based growth across countries and sectors of the economy. The euro strength seen so far is unlikely to derail the growth story or pave way for a return of deflationary worries.
At the same time, however, given the remaining slack in the labour market, inflation is far below the target and is likely to rise only at a very sluggish pace.At the same time, however, given the remaining slack in the labour market, inflation is far below the target and is likely to rise only at a very sluggish pace.
Stupnytska adds that the ECB will be concerned that the Catalan independence crissi could have a “non-negligible” impact on growth.Stupnytska adds that the ECB will be concerned that the Catalan independence crissi could have a “non-negligible” impact on growth.
UpdatedUpdated
at 1.19pm BSTat 1.19pm BST
1.09pm BST1.09pm BST
13:0913:09
German conservative MEP Markus Ferber has heavily criticised the ECB’s decision to extend its stimulus programme.German conservative MEP Markus Ferber has heavily criticised the ECB’s decision to extend its stimulus programme.
Ferber argues that there’s no justification for buying tens of billions of government and corporate bonds each month, with newly created money.Ferber argues that there’s no justification for buying tens of billions of government and corporate bonds each month, with newly created money.
Ferber says:Ferber says:
“The Eurozone is growing strongly, inflation is picking up, and downside risks are minimal. It seems like the textbook case for the right time to phase out quantitative easing and start a normalisation of monetary policy.“The Eurozone is growing strongly, inflation is picking up, and downside risks are minimal. It seems like the textbook case for the right time to phase out quantitative easing and start a normalisation of monetary policy.
Instead the ECB locks in their flawed monetary policy approach for the months to come and defers normalisation indefinitely. I am disappointed that the ECB missed yet another chance to initialise a normalisation of monetary policy. The asset purchasing program will keep distorting the market and lays the foundations for the next crisis.”Instead the ECB locks in their flawed monetary policy approach for the months to come and defers normalisation indefinitely. I am disappointed that the ECB missed yet another chance to initialise a normalisation of monetary policy. The asset purchasing program will keep distorting the market and lays the foundations for the next crisis.”
1.07pm BST
13:07
1.02pm BST
13:02
The euro has dropped by half a cent against the US dollar since the ECB announcement, to $1.176.
That suggests that some traders had expected a more dramatic cut to the Bank’s stimulus programme.
In theory, the ECB could have decided to buy even fewer bonds per month, or only extended the QE programme by another six months, rather than nine.
12.58pm BST
12:58
ECB cuts QE: Snap reaction
My colleague Richard Partington tweets:
ECB says it plans to cut asset purchases from €60bn to €30bn from Jan. Keeping €30bn until Sept 2018. Slow withdrawal from QE.
Danske Bank have helpfully summarised today’s ECB statement:
🇪🇺#ECB extends #QE for 9 months at EUR30bn per month, in line with our expectation. $EURUSD pic.twitter.com/EhKabFjblA
12.50pm BST
12:50
ECB cuts QE programme to €30bn per month
BREAKING: The European Central Bank has slowed the pace of its stimulus programme.
From January 2018, the ECB will buy €30bn of new bonds each month -- that’s down from €60bn per month at present.
The ECB’s governing council has decided to continue this quantitative easing programme for at least another nine months - or longer if needed.
That means the ECB has taken another step towards ending the era of ultra-loose monetary policy.
The ECB says:
From January 2018 the net asset purchases are intended to continue at a monthly pace of €30 billion until the end of September 2018, or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim.
If the outlook becomes less favourable, or if financial conditions become inconsistent with further progress towards a sustained adjustment in the path of inflation, the Governing Council stands ready to increase the APP [Asset Purchase Programme] in terms of size and/or duration.
The ECB has also left borrowing costs unchanged.
That means the headline eurozone interest rate remains at 0.0%, and banks face a negative interest rate of -0.4% for leaving money in the central bank’s vaults.
Details and reaction to follow!
Updated
at 12.52pm BST
12.41pm BST
12:41
After a busy morning, City traders are now turning their attention to Frankfurt.
The European Central Bank is poised to announce the decisions taken at today’s governing council meeting. We’re expecting the ECB to leave interest rates at their record lows, but also outline how it could slow its bond-buying programme (our opening blogpost has more details).
The decision comes at 12.45pm BST, followed by a press conference with president Mario Draghi at 1.30pm.
12.40pm BST
12:40
Labour MP Anneliese Dodds, who represents Oxford East, tweets:
.@CBItweets monthly survey: Retail sales have suffered sharpest monthly decline since fin crisis. Symptom of falling real pay under Tories.
12.35pm BST
12:35
In other bad news...the Unite union in Northern Ireland has warned that aerospace company Bombardier is planning to cut 280 jobs at its Belfast plant.
Bombardier faces legal action in the United States from rival Boeing over the development of the C-Series jet.
Boeing alleges its Canadian competitor has been receiving unfair state subsidies to build the new plane. Unite point out however that only last month Bombardier announced a new business partnership with Airbus.
Davy Thompson, Unite’s regional co-ordinating officer said today:
“The jobs to be lost are functional as opposed to operational meaning losses will be concentrated outside the main production lines but this will be devastating news for the workers concerned and their families in the run-up to the end of the year.
Unite is calling on management to review this decision.
12.33pm BST
12:33
Laith Khalaf, senior analyst at Hargreaves Lansdown, says UK retailers will be hoping the Bank of England doesn’t raise interest rates at its November meeting:
These latest numbers from the CBI will only add to the mixed economic signals to be digested by the Bank of England next week when it decides whether to increase interest rates for the first time in over a decade. Retailers will breathe a sigh of relief if the bank chooses not to increase rates and further burden consumers with additional mortgage costs, at a time when they are already feeling a bit of a pinch.
As we enter the key Christmas trading period, the retail industry is desperately in need of some festive cheer.
Updated
at 12.53pm BST
12.21pm BST
12:21
Full story: Alarm sounds over state of UK high street
If you’re just tuning in, here’s our news story on the retail sales figures:
The fastest monthly fall in high street sales since the height of the recession in 2009 has raised fears for the retail sector ahead of the crucial Christmas trading period.
A survey by the the CBI found that 50% of retailers suffered declining sales in September while only 15% benefited from an increase, leaving a rounded balance of -36%, the lowest since March 2009.
The business lobby group said the survey showed retailers were “feeling the pinch” from rising inflation, which has eaten into consumer incomes and squeezed profit margins.
Rain Newton-Smith, the CBI chief economist, said: “While retail sales can be volatile from month to month, the steep drop in sales in October echoes other recent data pointing to a marked softening in consumer demand.”
The gloomy CBI survey came as Debenhams warned of an “uncertain” environment on the high street in the run up to Christmas after suffering a 44% dive in profits.
The department store confirmed the closure of two stores, in Eltham, south London, and at Farnborough, Hampshire, affecting about 80 jobs, as sales on the high street continue to fall. They are the first of up to 10 UK branches that Debenhams has earmarked for closure....
More here:
12.20pm BST
12:20
Debenhams, the UK department store chain, has added to the uncertainty in the UK retail sector today.
It reported a 44% slide in pre-tax profits at the company over the last 12 months, and warned that the retail environment is challenging.
Sergio Bucher, CEO, says:
The environment remains uncertain and we face tough comparatives over the key Christmas weeks.