ECB Expected to Start Tapering But Wishing to Avoid Tantrum

The European Central Bank meets for its long-awaited policy decision on Thursday, potentially spelling out the beginning of the end of its asset-buying program in what could be one of the most critical market events in 2017.

ECB President Mario Draghi is widely expected to outline a plan to begin tapering the central bank’s bond purchases, though the details of how much and when have been the subject of much speculation.

Draghi’s main challenge will be to avoid sparking a euro rally. He’s also presumably aiming to avoid a “taper tantrum” in the bond market, such as was seen in the U.S. in 2013 when Ben Bernanke, who was then Federal Reserve chairman, indicated the central bank was preparing to begin winding down its monthly asset purchases.

“Ideally, the ECB would like to announce tapering as noiselessly as possible, limiting any upward movement of interest rates and the euro to a bare minimum,” wrote analysts at ING, in a note.

via MarketWatch

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza