The Importance of ECB Wording on Inflation – Euro Thoughts Sep 7-11 2009 – UniCredit Group

Last Thursday my boss, Marco Annunziata, did not hesitate to define President Trichet a true statesman for his wise and transparent conduct of the ECB September press conference. In the last few weeks, with his intervention in Jackson Hole, the Sep 4 presser, and the op-ed in the Financial Times the following day, Mr. Trichet has been able to reassure markets that the ECB is aware that the economic and financial cycles remain fragile, that the weapons of mass salvation employed over the last year need to remain in place (e.g., the decision not to apply a spread on the upcoming 12-month fixed rate-full allotment operation), thus steering market rates’ expectations in the desired direction. The publication of bearish staff forecasts has contributed to finish the job. The ECB stance remains quite accommodative and any decision on rates and on the unwinding of unconventional measures is postponed to next year.