The Daily Update: ECB / Gekko Wannabes

Yesterday, as expected, the ECB kept policy unchanged, however it will continue buying bonds at a pace ‘moderately slower’ than in the last two quarters. In the press conference after the announcement Christine Lagarde, the European Central Bank President, was pushed on inflation, where she was at pains to convince that their analysis confirmed it is transitory in nature, even if a bit stickier than first thought. Lagarde said the ECB had done much ‘soul-searching’ over its stance, however, concluded that inflation was still temporary, and as such any policy response would be premature.

Lagarde identified higher energy prices, ongoing supply chain disruptions, and one-off base effects such as the end of a cut in German sales taxes as the three main factors temporarily driving up eurozone inflation. ‘We talked about inflation, inflation, inflation’ she told the press conference, adding ‘While inflation will take longer to decline than previously expected, we expect these factors to ease in the course of next year. We continue to see inflation in the medium term below our 2% target’.

Lagarde was also pressed, three times in fact, about market expectations for an interest rate hike in mid to late 2022. She said this was out of line with the bank's policy guidance, reiterating that rates will not rise until inflation across the euro zone is seen back at target by the middle of the forecast period and set to hold there. She also mentioned that ECB analysis wasn’t compatible with a rate hike any time in 2022 and even in the following year or so.

One observation that has been noted is that Lagarde's words appeared a little timid. Many were expecting a more forceful pushback on rate hike pricing, which didn’t happen, even stating it was ‘not for her to say’ whether markets have got ahead of themselves.

Plus we saw Facebook unveiled its new branding; it’s now going to be called Meta. Mark Zuckerberg wants a ‘Metaverse’, a digital world built over our own, comprising virtual reality headsets and augmented reality. ‘We believe the metaverse will be the successor of the mobile internet’, Zuckerberg said, adding ‘We’ll be able to feel present – like we’re right there with people no matter how far apart we actually are’. The new ticker, from December, will be MVRS.

In all the excitement it seems some day-traders got a little ahead of themselves, as Meta Materials, which we are told is a favourite with the wannabe Gordon Gekkos, surged in late trading as investors mistook it for Facebook.