Summary of what has been said so far: Nothing, just as we said last week [9]. Draghi basically repeated the June 29 summit bottom line that the EFSF should buy PIIGS bonds, the ECB "May" act, which means Germany is still not on board, and that after talking markets up by 5%, he has delivered nothing but a delay. This is a huge blow to his and the ECB's credibility.
* * *
With speculation ripe out of everyone from Reuters to the FT about what Draghi may or may not say, with or without Germany's blessing, the best at this point is just to hand over the microphone to the former Goldmanite. Here is the live webcast of Draghi's press conference. Pay attention as a word out of place will send the EURUSD plunging by 200 pips. Or soaring.
Key prepared highlights on the economy:
- DRAGHI SAYS UNDERLYING PACE OF MONETARY EXPANSION IS SUBDUED
- ECB'S DRAGHI SAYS INFLATION EXPECTATIONS ARE FIRMLY ANCHORED
- DRAGHI SAYS INFLATION SHOULD DECLINE FURTHER TO BELOW 2% IN '13
- DRAGHI SAYS EURO-REGION GROWTH REMAINS WEAK
- DRAGHI SAYS HEIGHTENED UNCERTAINTY WEIGHING ON EURO SENTIMENT
And now on to monetary policy:
- DRAGHI SAYS EXCEPTIONALLY HIGH RISK PREMIUM IN SEVERAL NATIONS
- DRAGHI SAYS RISK PREMIUM NEED TO BE ADDRESSED
- DRAGHI SAYS EURO IS IRREVERSIBLE
- DRAGHI SAYS HIGH YIELDS ARE UNACCEPTABLE
- DRAGHI SAYS POLICY MAKERS NEED TO PUSH AHEAD WITH CONSOLIDATION
The punchlines begin: Draghi punts to governments:
- DRAGHI SAYS GOVERNMENTS MUST STAND READY TO ACTIVATE EFSF
And now the open ended:
DRAGHI SAYS ECB MAY UNDERTAKE OUTRIGHT OPEN MARKET OPERATIONS.
"MAY" and more:
- DRAGHI SAYS ECB MAY TAKE FURTHER NON-STANDARD MEASURES
And the dud:
- DRAGHI SAYS OVER COMING WEEKS ECB WILL DESIGN MODALITIES
So nothing today.
And now the Q&A:
- Draghi says ECB governing council discussed rate cut, not the right time
- "Largely unchartered waters" regarding negative deposit rates
- Draghi: "THE ECB CAN NOT REPLACE GOVERNMENTS. UP TO GOVERNMENTS TO ASK FOR INTERVENTION"
- "Monetary policy is independent"
- Draghi: "any bond buying will be focused on the short part of the yield curve." Forget 5 Year LTRO
- Draghi "Surprised by amount of attention ESM banking license has received" Uhm, maybe talk to your colleage Nowotny about starting the "attention"
- Draghi: "Current design of ESM does not allow it to be recognized as a suitable counterparty" And more cold water.
And the punchline again:
- Draghi says even if we were ready to act now, would not have grounds to do so
Take home: the ECB is now merely a branch office of Buba.