Draghi Admits "Growth May Have Peaked"; ECB To Delay QE Unwind

As we have showed repeatedly over the past month, the European economic imploding, and nowhere is this more obvious than the Citi Eurozone Economic Surprise Index why will soon hit its post financial crisis lows.

It appears that after weeks of dithering, someone at the ECB also figured out how to pull up this chart on their Bloomberg because moments ago, and one month after the ECB first admitted that things are not ok when the central bank cut its 2019 inflation forecast, arguably due to protectionism concerns...

... Mario Draghi finally admitted what we all know:


To be sure, Draghi also brought up the usual spate of platitudes he mentions every time, including that: "Notwithstanding the latest economic indicators, which suggest that the growth cycle may have peaked, the growth momentum is expected to continue", that protectionism "may have already had some negative impact on global sentiment indicators" and that "while our confidence in the inflation outlook has increased, remaining uncertainties still warrant patience, persistence and prudence with regard to monetary policy."

His conclusion was the punchline: "An ample degree of monetary stimulus remains necessary."

Which leads us to the second point. As Draghi was speaking, Bloomberg reported the latest ECB "trial balloon" according to which Central Bank policymakers "see scope to wait until their July meeting to announce how they’ll end their bond-buying program", according to euro-area officials familiar with the matter.

In other words, so much for the ECB tightening, or being able to tighten, any time soon.

More details:

Governing Council members want sufficient time to judge if the economy is overcoming its first-quarter slowdown, the officials said, asking not to be identified because the internal deliberations are confidential. That could mean the June meeting, which would have the advantage of linking the decision to updated economic forecasts, might be too soon.

Some governors don’t see any need to change the ECB’s guidance on interest rates at the same time, arguing that they can afford to wait to see how the market reacts to the announcement of an end-date for quantitative easing, though not everyone agrees. The officials said there have been no formal discussions at all on a strategy for rates.

And just like that, the "recovery" narrative cracked not with a bang but a whimper.... well, maybe a whimbang because judging by some risk asset reactions, traders were clearly not happy that the whole tightening/recovery fable is now officially finished, as can be seen in both the EURUSD...

... in bunds...

... and even in stocks:

And technicals have broken...


J J Pettigrew Fri, 04/20/2018 - 11:36 Permalink

Delay the unwind???

You mean they can NOT UNDO that which they created.

There is no unwind.  It was a MONEY DUMP...just like here...

No unwinding of consequence...and no auditing as to where the money went.


wwwww Fri, 04/20/2018 - 12:39 Permalink

"Notwithstanding the latest economic indicators, which suggest that the growth cycle may have peaked, the growth momentum is expected to continue"

Norman, coordinate!

Last of the Mi… Fri, 04/20/2018 - 12:52 Permalink

And there it is! Toldja! No way will they stop printing. We're at the point of no return in printing and it just cannot be stopped. Printing and raising rates marginally while calling it good is a possibility, but stopping printing which is in effect the devaluation of everything on the planet that does not directly benefit from printing is just not a possibility. 

Fed will go the same way in a while. We're still in the "strong economy raise interest rates" rainbow. But the reality is somewhat less ROYGBIV'y. 

joeyusa Fri, 04/20/2018 - 13:54 Permalink


CashMcCall Fri, 04/20/2018 - 14:47 Permalink

As I have said for years... you can't expect socialist countries to grow more than 1% a year under the best of conditions. As the US approaches Socialist status too, we see exaggerated expectation and Socialist realities setting in. 

Time for Russia to hike gas prices... prepaid in gold if you please. That should end Europe's cooperation with the USA.

Paul Morphy Fri, 04/20/2018 - 15:08 Permalink

Germany announced yesterday that it has started to hit the economic buffers.


Draghi is supposed to have pan-Eurozone sight which means that he is supposed to be aware of the actual situation. Many of the Eurozone economies have become zombified. The folks in the ECB ivory tower might well be living it up, but for the rest of us plebs economic activity is anemic. 


ECB is stuck between a rock and a hard place. All of their very own making too.

BritBob Fri, 04/20/2018 - 15:40 Permalink

Notice the use of the word 'May'. Nobody knows. Has Draghi got a crystal ball?

The latest survey indicators all suggest that GDP growth in the euro-zone has peaked. That said, the economic recovery looks set to continue at a healthy pace over the next few years. (European Economics Weekly 2 March 18)