09.12.2015 14:00:46

ECB's Nowotny Blames Analysts' Massive Failure For Market Disspointment

(RTTNews) - Market analysts' expectations regarding the outcome of the December 3 policy session of the European Central Bank were exaggerated, leading to disappointment, a member of the bank's rate-setting body said Wednesday.

"It was really a massive failure of market analysts," ECB Governing Council member Ewald Nowotny said in Vienna.

Nowotny, who head Austria's central bank, also said that there was the ECB's communication never gave a false signal and hence, there was no need to review the bank's communication policy. He also asserted that markets cannot pressure the ECB to act.

Market expectations were hyped by repeated affirmations from ECB President Mario Draghi and fellow Governing Council members since the October 22 policy session that the bank was ready to do everything to bring euro area inflation to its target of 'below, but close to 2 percent'.

In its latest attempt to kindle inflation in the euro area and underpin feeble growth, the ECB last week cut its deposit rate by 10 basis points to -0.30 percent and extended its asset purchase programme until at least March 2017. The bank also broadened its asset purchases to include regional and local government bonds.

The measures were less than what markets were looking for and the euro strengthened after the ECB announcement and stock markets fell.

Investors had expected a bigger cut to the deposit rate and an enhancement in the monthly asset purchases of EUR 60 billion to as much as EUR 80 billion. Some analysts had also predicted that the bank will introduce a two-tier deposit rate to support the negative deposit rate.

Nowotny spoke at an event to unveil the Austrian central bank's latest macroeconomic forecasts. Austria's economy was forecast to grow 0.7 percent this year and 1.9 percent next year. The economy was projected to expand 1.8 percent in 2017.

The entry into force of the tax reform in January 2016, expenditure for asylum seekers and refugees as well as the housing initiative were the factors influencing the projections, the bank said.

Inflation was forecast to rise to 1.3 percent next year from 0.8 percent this year. For 2017, inflation was expected at 1,7 percent. The rise in inflation is primarily due to external cost factors, the bank said.