Shah on the ECB
A time to keep the powder dry.
(Update after the ECB decision to keep rates unchanged)
At the September meeting the ECB opening statement was willing to simply highlight that they are particularly attentive when it comes to money markets.
We now have a modest step up in the language with Draghi highlighting the ECB is ready to consider all available instruments for money markets.
This is largely incorporating the potential to act on money markets and is consistent with an LTRO which was preannounced last week by Draghi.
What is interesting is that Draghi is choosing to reiterate this in the Q&A.
The timing of an LTRO remains uncertain but the ECB is hoping the willingness to act will be sufficient to keep the money market curve from steepening.
EONIA forwards are largely flat on the day although remain very volatile.