Would cut more than this. Alix but it looks like they actually cut more than expectations because it was 19. 75 , go into 16. 50 . It appears they did actually cut, so50 basis point it seems like it was a little deeper than even the most dovish expectations. 19. 75 , and was they cut it to 16. 5 percent. So it did exceed expectations. Alix but yet, you have the lira moving higher. I think that is never a good sign, when you have the currency moving higher when you have a 325 basis point cut. Interesting. We will have to watch that currency. That feels very much like the playbook last time we saw a cut from the turkish central bank. You have the, yes, turkish central bank. Now we are pushing ahead to the ecb. S p futures unreal, up over the 3000 mark. Hold . He rotation we seen we took a pause yesterday. Odollar euro firmer eurodollar a little firmer this morning into the ecb. A little bit of wiggle room when he market. Youre seeing a little bit of buying in the bond market in the u. S. And europe. Crude getting hit over 1 . , for the day lodz coming on next for the deluge next year coming on for supply. Joining us now from beijing is john lou, from london, stuart wallace, matt miller outside the ecb in frankfurt, and alex harris in new york. In beijing, the u. S. And china are taking steps to ease tensions. Lengthened the delay for additional tariffs. He tweeted, due to the fact that the people of china will be sela bring their savvy and the anniversary on october 1, we have agreed will be ebrating the anniversary the peoples republic of china will be celebrating their 70th anniversary on october 1, we have agreed as a gesture of goodwill to move the increased tariffs of 250 billion worth of goods from october 1 two october 15. When the u. S. Was calling china a currency manipulator, by contrast, this is much more optimistic, what we are seeing now. David we have the anniversary coming up. The president referred to it specifically. We also perhaps have some talks in washington. Do we have any sense of when this happens . Does this maybe also put some pressure on those talks . John we dont have a specific date for those talks, but they will be in washington on october. We are expecting lower level talks in the next week or two to happen in preparation. I think these steps by both sides make the outlook much more optimistic than they were two or three weeks ago. Alix thank you so much for that analysis. Now we go to london, where opec and allies are meeting in abu cuts anddiscuss output strength in demand. Discussions of further cuts will have to wait until december. Will guarantee our cuts to reduction until end of year, and definitely we will have the meeting in december. We really reveal what we would , any type of measures that we require. Gdont want to preempt the mmc. Alix what did we take away . Was his first meeting as minister. There was no sense we are about to do a uturn on the strategy of the last couple of years. But the iea is telling you exactly what you need to know. Theres a surplus looming next year, and they dont really have a plan in place to deal with it. At the same time, you got the prospects of perhaps easing sanctions on iran. Thats been a big support for the market. Since the firing of john bolton, we are down on the oil price, so that tells you about how much had been priced in as a risk factor for a war in the gulf. On top of that come of the trade war carries on, the problem theyre facing is something they cant do much about, which is the demand side of things. What they control is supply, but even within that field, you got a lot of members that are not adhering on what they pledged to , so saudi continues to have to cut much more than they pledged. David now we turn to frankfurt, where we are awaiting the ecb decision as mario draghi prepares to ramp up monetary stimulus again. Matt miller is in frankfurt. Give us the range of expectations. Matt the survey that we did of economists is for bond buying ofgrams, renewed bond buying 30 billion euros over the next 30 billion euros a month over the next 10 years. Becausevery interesting the backdrop of some very vocal opponents you have been hearing for the last couple of weeks. Againstple speaking out the need for more bond purchases. In addition to that, draghi is expected to cut rates another 10 basis points, deeper into negative territory, and talk a little bit about tiering. It should be an incredibly fascinating meeting, but one where i think markets are prepared to be disappointed, so almost anything we get, even if it is just in line with expectations, would probably play out like a positive surprise rather than go unnoticed. Alix dig into it a little more when it comes to tiering. What is at stake for the banks monetarily . Matt theres a lot at stake for the banks. Obviously, right now we are looking at 40 basis points. The problem is they are even lending less in a negative rate regime. We saw a study that showed negative rates dont really spur more lending. You coulds tiering, see back stocks continue to rally. They are currently up about 1 across europe. If not, definitely expect them to take a bigger hit because banks here have suffered so much due to the lack of tiering and due to the negative rate scenarios they are currently in. David thank you so much. That is matt miller in frankfurt, where he will be for the announcement about 40 minutes from now, followed by maier draghis News Conference at 8 30 eastern time by Mario Draghis News Conference at 8 30 eastern time. Lets bring in bloombergs alex harris. Alex i think market per to the bits are expecting 2. 3 , Market Participants are expecting 2. 3 , but really, they are looking ahead to what this means for the fed next week. The data has been somewhat mixed. Overall, i think cpi is the bridesmaid, not the bride today, because the release coincides with the beginning of Mario Draghis press conference. I think the bond market is going to be taking its cues from europe today. Alix as the fed will be. Thank you very much. Coming up on this program, more on your morning trade analysis and the markets in todays first take. This is bloomberg. David now for the bloomberg first take, where we give you the news and you get the trade analysis of the markets. First, waiting for the ecb trade decision. Here to discuss our Michael Mckee and romaine bostick. Mike, a lot of speculation. We have a range of possibilities here. How easy are they going to go at the ecb . Michael its a case of not so much what come about whats next. The market has pretty much priced in that they will do a 10 basis point cut in the deposit 50,and then take it to and announced that they will restart qe at some point. Anything less than that is going to be a huge disappointment. But really, what the market is looking for is for mario draghi to deliver another we will do whatever it takes kind of speech, and say in the future, we are committed to making sure that we hit our price target, or that the economy recovers. Some sort of language that tells them this is not just a one and is going toe ecb stay on the job. Romaine a lot of people dont think hes going to be able to go that far, whether its his own willingness or the rest of the committee to go along, particularly on the qe side, and push for anything more aggressive. Seeing that in the bond trading. I think a lot of the positioning right now, even on the u. S. Side, is that hes not going to be able to pull this off. Alix i also have to wonder if what we learn, do we learn that they are out of bullets . Is he basically saying, you are right . Michael it kind of depends on the way youre looking at what the ecb is doing. Alix halffull, halfempty kind of thing . Michael if you think the ecb is going to turn around the european economy, that is not going to happen. Can they be a backstop to hold back the flood . Maybe. They could put a sort of floor of insurance policy in place to make sure the contraction weve seen in various parts of the economy doesnt spill over into credit markets. Its about as good as you can hope for at this point. David mario draghi is famous for having said whatever it takes. Maybe it takes more than what he has. Forget the bazooka. The bazooka was fiscal stimulus. That was not monetary. Romaine thats a good point. We are already hearing about this transition between draghi and lagarde, the idea that lagarde is going to be although more focused on the physical side, trying to sweettalk some of the european members into doing a little more fiscal stimulus. Michael it is going to be hard, the. She can talk about it hard, though. She can talk about it, but it is not just the german attitude towards fiscal stimulus. It is the german law towards going out of a balanced budget, and how far they can go. It is probably going to be a while before we see anything meaningful, and it really has to come from germany. Germany is the economy where they can stimulate domestic demand and maybe bring in imports and really help that area. Alix which is a different conversation than lets put some money towards infrastructure or wind turbines. If you come inside the bloomberg, this is ecb survey of Consumer Credit appetite. You might go to 50 basis pointss rate, but that is not going to do anything to help the Consumer Credit appetite. That is what you need. I would argue that infrastructure stimulus isnt going to change that line. Michael i did a chart yesterday that lookalike like that for u. S. Loan demand. It is the same sort of thing. Companies arent finding the cost of credit or availability of credit a problem. They dont want to borrow because they dont know whats going on. It gets us back to the old argument that the trade war is affecting the global economy, and that is not something that Monetary Policy can fix. Romaine and that is todays argument. Thats been the argument all year. When we look at the lending side of the equation here, you have no companies now willing to go out on that limb. If you get to a stage where you start to see consumers feeling like maybe theres a reason why we shouldnt be putting x, y, z on the credit card, you in trouble. I dont know if draghi can do it. I certainly dont think powell can do it. He needs something out of the political side of these governments to change consumer sentiment, and more importantly, change business sentiment. David to actually go into economics, what happened to keynes . This chart struck me as extreme mary. As extraordinary. This is country debt as a percentage of gdp. Germany, the white line, look at their debt, german sovereign debt compared to gdp. They are actually deleveraging. Michael they have a lot of room to expand their physical presence, but they have a law that says you can do that. You cant go beyond a certain percentage of your budget to stimulate the economy, to go into deficit. They would have to change that. Its an extra step that makes it politically that much harder. Keynes is more of a practical matter in terms of the budget constraint, but germany could do something. Alix talk about practicality for a second. Just pivoting from the turkish central bank, 320 five basis points, and the lira goes up. We talk about president erdogan not being in touch with real econics, but it is kind of happening. Michael you are seeing the interplay of currencies around the world overlaid over Market Expectations. You really have to go beyond the day of and see what the longterm trend is going to be coming out of this turkish decision. Decisions,ast 15 ecb mario draghi has left the euro lower right afterwards. The question is, does it go up today because he doesnt do enough . The Market Expectations reaction, when i was covering the u. S. Economy for bloomberg news, i used to laugh at the idea that five minutes after an economic release came out, we were supposed to care what the markets thought. They are just repositioning. Did me a day or two, i week, and then we will have an idea. Alix thats no fun. Just to wrap that up in terms of positioning, where exactly are we after the shakeout in the bond market, as well as the currency market . Romaine you so that pause in the bond selloff. Today, the expectations are that the bond selloff was a little bit of an anomaly. A lot of folks are really just waiting to see what we get out of draghi today, and presumably what we get out of fed and the boj next week. That is probably going to end up with a perception in the bond rally that weve pretty much had all year long. David does that depend on what trade . With we also have some nice words back and forth between washington and beijing right now. Michael thats longerterm. Markets react a little to the headlines on trade each day. Theres optimism they will get to a deal, and the imperative is moving in that direction politically for both sides, but what we may see is a smaller deal focused on the bilateral trade deals if china agrees to buy more stuff and trump lists dissensions on huawei trump huaweihe sanctions on or Something Like that. Trump could campaign on that. Alix how much of this do you think is due to that poll that said more americans are more pessimistic about the economy and exciting a recession . David and trumps Approval Rating is going down. Want tot trump doesnt go into an election with a bad economy. Romaine at some point, trump the politician has to Pay Attention to sentiment and realize if he was to win over the electorate, he might have to shift a little bit or give in on some of these trade issues. Alix bloombergs Michael Mckee and romaine bostick, think you very much for joining us. We do want to take a moment now a man who died yesterday at 91, who really transformed the energy world in many different days. He led the transition in some ways to natural gas and wind power. David he really was a pioneer in many respects. He really changed the corporate function. Alix he really wanted, when he was running an oil company, to go after a lot of deals to build them up. , but of them didnt work what is interesting about his legacy is that Company Actually turned into pioneer natural resources, which is one of the premier shale plays in the permian bet thats left. The ceo of that company now wrote, in the three years i had directors, he of confided in me that he was wrong. Over time, he became a large shareholder in the permian basin. He was worried about peak oil for a while there, and fracking really change that mentality for him. David at the end, he turned around into renewables. Alix absolutely. David he wanted to have natural gas powering trucks across the country. Alix really exemplifying the shift of energy in the u. S. Throughout the day, we are going to hear from people who knew tbone pickens who knew t. Boone pickens. He died yesterday. He was 91. Viviana this is bloomberg daybreak. Job cuts on the way at British American tobacco. Ceo plans tohe new eliminate 2300 positions that will affect one in five management positions. In major markets, cigarette sales are declining. British american faces pressure to jumpstart its underperforming portfolio of cigarette alternatives. For months, oracle grappled over whether to disclose its coceo was ill. Ae company says he is taking leave of absence for unspecified Health Related reasons. For more than a year, hes been in and out of the public eye. Oracle making the announcement after bloomberg contacted the company in relation to a story about his health. Piketty is out with a new book that explains how governments should get rid of billionaires. Today, the french edition of capital and ideology was released. It is more than 1200 pages long. You will have to wait into next year for the english edition. That is your Bloomberg Business flash. David it may have sold two and a half million copies, the last book, but im wondering how to people read the whole thing. It was 800 some pages. Alix for david to not read something 100 is kind of a miracle. That never happens. David hes really addressing the wealth and income inequality around the world. He has specific proposals on how to do that. He says you can own however much of a company that you want, but you can devote more than 10 of the shares. And he says every person should get a lumpsum payment ofn they are 25 of capital one under 32,000. Alix what is interesting is you may or may not think those thissals are crazy, but also has potential to be real policy. David you can count that that sort of Wealth Distribution will be on the debate stage tonight. Alix no kidding. Coming up, we are 15 minutes away from an anticipated ecb rate cut. We will discuss with jeff pinetop, Charles Schwab chief investment strategist with Jeffrey Kleintop, Charles Schwab investment strategist, and for mckee on, Capital Economics european economist. This is bloomberg. When you rest on a leesa hybrid mattress, bedtime is no longer simply the time you go to sleep. Its time to switch off and catch up. Enjoy me time, and we time. 40 winks or 8 hours solid. The leesa hybrid mattress combines two technologies to give you deeper rest and rejuvenation. 1,000 pocket springs provide edge to edge support, responsiveness and comfort, while premium foams relieve pressure. Keep you comfortably cool and limit motion transfer. Leesas hybrid mattress is not only recommended by experts, experts choose to sleep on it too. Try it yourself in any west elm store. Or order online and well ship it to your door so you can try it risk free. The leesa hybrid is american made. Built to last. And, because Everyone Needs a place to rest, we donate tens of thousands of mattresses to those in need. Experience the leesa hybrid mattress. Right now, its on sale. Order today. Go to leesa. Com. Alix this is bloomberg daybreak. Youve got about 15 minutes until we get that important ecb rate decision. S p futures are up 0. 1 . Where we will see the momentum, the value all trade out, the ch urn beneath the markets the story of the last few days. In other asset classes, the eurodollar and bund yields is where you will see all of the action in about 15 minutes time. How much is baked in . What will be a shakeout or reversal depending on how dovish or hawkish the statement is . You are seeing some buying in the longhand in germany, but hasnt really hit those records of 68, 75 we seen on the german tenyear. Crude getting hit on some oversupply fears coming out from the iea. David lets turn to that ecb decision. We are only about 15 minutes away from it right now. Widely expected the central bank will cut the deposit rate some 10 basis points to a 50 basis points, but the focus may well end up being on qe. Joining us from boston is Jeff Kleintop, Charles Schwab chief lublin dustin strategist, and , capitalmckeown economics chief european economist. What is more important, the deposit rate or qe question . I think it is that both of them help the banks. We seen the banks threatened to hurt the overall european economy to continue to retrench and if depositors increasingly put money outside the Financial System, fearing to get flat or negative Interest Rates. It is a commendation of the qe supporting the Balance Sheet of the banks, and at the same time, the tearing of the negative deposit rate to reduce or even eliminate a negative impact on the bank income statements. Banks have rallied about 9 or so,ver the last month or really this month. Thehat continues going into huey program, the qe program, there may be more to go. David lets talk about the effect the tiering might have on the banks. How much relief will that give them . Jennifer it will give some relief. I think a point about the negative deposit rate is that it applies to a relatively small amount compared to bank reserves, about. 02 of bank total assets. The negative right in itself is not that important. Tiering is a bit more symbolic, and what is more important is any announcement on qe and how long Interest Rates are likely to stay the slow. David is it more important how much they go into qe, or the duration . Specifically, whether they give any end date at all . Jennifer i think it will be important to see whether or not they do keep it open ended. Policyuld be a bigger base for an openended program. Where they left off, they were only at 10 billion per month. I think the expectations are for Something Like 30 billion per month. I think they might get a bigger impact if they start buying Corporate Bonds more because the yields there are obviously higher. Feel isff, where do you the biggest asymmetric risk in 15 minutes . Jeff i think if they communicate something that is only halfhearted. Inflation expectations in the euro zone have come down sharply. We are looking at roughly 1. 2 in the forward Inflation Expectations, down from 1. 5 the last couple years, down from 2 years ago. They really need to show that they have the conviction and the tools to turn around prospects on inflation and anchor them back towards the 2 level. Thats going to take a big move, so we need a little bit of shock all from the s little bit of shock and awe from the ecb. Jennifer, to pivot off of that commode of my favorite charts today inside the terminal , one of myf of that favorite charts today inside the terminal. Is there anything the ecb can do today to change this . Jeff i think theres jennifer i think theres very little it can do. The cuts in the deposit rate so far have done very little to change consumer demand. The big question for consumers is whether the Unemployment Rate is going to stay low. The surveys adjusts employment intentions are weakening, and i think that is what it is going to cause consumers to rein in their spending. Cuts in the ecb Interest Rates and, in particular, longterm Interest Rates, has helped consumersome increasing their savings, so a bit of a perverse impact started to come through. David jeff, there seems to be some division in what some of the members of the ecb say, and particularly, you expect it out of germany and the netherlands, but what about france . Does mario draghi have a political problem . Jeff possibly. France has been hesitant to embrace the new qe programs. However that might change under Christine Lagarde, handpicked by president macron, she certainly has his endorsement there. We will be watching this very closely in terms of the size and duration of the qe program. David Jeff Kleintop of jenner of Charles Schwab and eown of i can on will stay with us. Economics will stay with us. Viviana President Donald Trump is postponing adding additional tariffs on chinese goods by two weeks. That means china can celebrate its october 1 national day without an escalation in duties. Bloomberg has large china may ofow renewed imports u. S. Farm goods. In the u. K. , a government document warns about government chaos if the u. K. Leaves the eu without a deal. Prime minister Boris Johnsons government tried to keep this document secret. Opec and its allies are pressuring members who havent come through with promised production cuts. The Cartel Meeting in abu dhabi. There is concern that the market could tip back into surplus. A new deal could be discussed in december. Global news 24 hours a day, on air and at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Im the vienna or tonto. This is bloomberg im viviana hurtado. This is bloomberg. Alix thank you. Jeff, it has been a real push and pull for oil. Iran on one side, and negative demand revisions. Where do you stand right now . Jeff you would have thought maybe there was a geopolitical premium, but with the removal of john bolton, who was very much a hawk on these things, and was the primary voice behind the u. S. Withdrawal, oil really hasnt moved much. Opinionet is of the that get some compliance on the supply side, but demand is weakening globally. We may begin to see it on the consumer side. Aree forces to balance oil right around the middle. That may continue. Alix if we see the rotation continue into value, for example, out of momentum, dont you have to buy Energy Stocks . Jeff well, it is a classic value sector. I think the key is it is to cyclical to buy in this environment. There may be environments that arent as exposed to Global Demand that might do a bit better than the energy sector. Even the materials sector, as we fear a more prolonged weakness in the global economy. Alix Jeff Kleintop of Charles Schwab will be sticking with us. Tune in later today for bloomberg commodities edge at 1 00 p. M. I will be speaking with dan pickering. It will be interesting to see where he sees value as bankruptcy starts to take up. Coming up, high risks on Mario Draghis big day. Will the ecb falls short of Market Expectations . If you have a bloomberg terminal, check out tv. You can watch us online, look at our charts and graphics, interact with us directly. Just go to tv on your terminal. This is bloomberg. Viviana this is bloomberg daybreak. Coming up later on bloomberg, the open on bloomberg the invesco vice chair of investments. There are concerns that Climate Change is affecting the decisions of oil producers. Will again attempt to take their china unit public. The plan to invest in ipo the thatthis claim revised a plan scrapped two months ago. The Worlds Largest retailer is rolling out an unlimited delivery Subscription Service in the u. S. Consumers can get unlimited sameday delivery. This from 400 stores in 200 markets. Walmart battling amazon and others in fresh food delivery. Im viviana hurtado. Thats your Bloomberg Business flash. Alix thank you so much. We are Just Moments Away from the ecb rate decision. Still with us, Jeff Kleintop of Charles Schwab, Jennifer Mckee mckeown ofr Capital Economics. I think jennifer i think this tiering idea will help a bit, but i cant really think of anything that is going to make a major difference. I think what would actually really help would be a change in fiscal policy because rate cuts havent really served to increase Inflation Expectations so far. David that is the question. Is there anything they can do today to get them selves back up to 2 . Tryingts hard to do and to move Inflation Expectations. Inflation expectations have actually fallen below the super core measure of inflation, which are the elements of inflation most sensitive to the output gap. That is a shocker. We havent seen that in 10 years, since the Global Financial crisis, so it is really about turning round those expectations sharply. Thats really got to probably come more from the Qe Program Since there are more prospects for fiscal stimulus. David what about the nature of the qe program, and specifically what sorts of things they might be likely to buy . Jeff the more aggressive they can be into things like bank bonds and other areas of the Corporate Bond market could actually deliver a bit more of that stock i spoke about earlier. That could reinterpret what they are doing and the impact it may have on private markets, and refocus growth on turning around the banking sector. It is so important to revitalizing the outlook for the economy, for the markets in general. A lot of what goes on today i think will be focused on trying suffer sure banks dont further from negative rates, and how much benefit they could get out of the qe program. Alix jennifer and jeff come about if you are sticking with us. We are just a few months away from that ecb rate decision. We have seen a big move in the bond market. You have to wonder if that is factoring in a better scenario for the banks. Bund yields move a little higher. We are looking for any information to come out now. It has not yet come out. Here we go. The ecb lowers its deposit rate to 50 basis points, so that is 0. 1 cut. That was widely expected by the markets. Many have been also expecting 20 basis points. We didnt get that. We only got 10. You are seeing the euro move higher. Ed also changes its guidance on the interestrate policy, one of the tools that they could use to change the guidance. David part of it is Inflation Expectations and what sort of guidance are they getting in the out years. Alix and they did restart qe. They are going to buy 20 billion euros of debt a month from november 1, and going to buy they did announce tiering. All as expected. David that was one of the key issues we were looking at. Lets go over to matt miller our colleague in frankfurt. Give us your take. Think it is interesting that the amount of quantitative easing they are committing to is less than the street estimate, and far less than the bloomberg estimate. We were looking for 45 billion a month. The street was looking for 30 billion a month. They are looking to do 20 billion a month, and they are not going to start until november 1. Bloomberg was expecting them to kick it off october 1. So it is a little bit less than and ind in both the size terms of the timing. In terms of the deposit rate cut , they went with the street estimate of 10 basis points. Aboutarlier was talking the cost to banks. I went into my terminal and found the Bloomberg Intelligence story that i think she was referring to. Theres about 2 trillion euros of excess reserve being held by european banks at the ecb. Is 40 basis points already a 7 billion euro drag every year on these banks. That is going to get worse depending on how deep this tiering goes. Analysts have been asking for 35 to 50 , so we will see how the tiering details pan out. Alix the ecb saying that part of holdings are exempt from the negative deposit rate. Another headline that came across, the ecb says the modalities of the tltros are going to be changed that banks can use. Some say that the tltros are the big bazooka. That if you whine up lowering if you wind up lowering the rates enough, it will spur liquidity in the market. That will be interesting, if we wind up looking at will be tltros actually be the boost that the other areas i not be. David youve been referring to the credit in the european union. As i understand, tltros say we will help you make loans. Alix and repay you enough you will actually make those bonds. David but the question is, is there demand for the loans . Alix jennifer mcke Jennifer Mckee on Jennifer Mckee out Jennifer Mckewon and Jeffrey Kleintop are still with us. Rate of purchases, we left off at 10 billion, but on the whole, people are tuned for about 20 billion a month, a little less than we mightve hoped. The questions now on what exactly they are going to be buying. I think that will be a positive surprise. David it is interesting to look at the reaction in the marketplace. It looks like the markets are sort of getting past this initially. I think you need to look into it a little more. Details of what they are going to be buying in the qe program arent going to be very effective, but it is clear they have reserve some ammunition for perhaps a no deal brexit. I dont expect they are done yet. Alix i just wa to point out some shock and awe this definitely being seen in the btps. You are not 0. 85 on the 10 year. Is there a possibility we are underestimating what the ecb can actually do . If you take a look at them changing some of the terms of the tltros, those longterm financing obligations, they are going to push maturity out to three years from two years, and they are basically going to pay the banks to lend. If they pay them enough, does that actually help . Jennifer well, i think what it does is very cheap liquidity helps the banks. Banks in europe have said better than those in japan, and i think that is largely because of these very generous loans. I dont think it is going to help stimulate lending, because demand for lending is falling. I think particularly if the Unemployment Rate starts rising, theres little help you can get consumers borrowing a lot more. How does this set up Christine Lagarde for when she comes in . Does he give her enough to work with that doesnt commit her to too much, either . Jeff i think this sets her on a path that she can expand if she chooses to come about doesnt force her in the early days to garner a coalition, to make an early changed policy. This sets a direction she can tweak rather than forcing her to set a whole new path. Issues mightlobal change given Christine Lagardes position as head of the imf. I wonder to what extent trust weighed on the mind of the ecb numbers here, as you think about their policy rate movement, down 10 basis point instead of 20. Were they worried about any potential downdraft to the euro and what trade impact might come from the Trump Administration . I am wondering how that might evolve under the Christine Lagarde ecb. A trumpe are on tweet watch now come up seeing how long it will be. Really good point. Thanks to Jeff Kleintop and Jennifer Mckeown for being with us today. The ecb has in fact cut the rate another 10 basis points to 50. They have also reinitiated quantitative easing at 20 billion. They did keep it open ended and extended tltros for another year, from two to three years. Theres a variety of issues here that theyve tried to accommodate, but maybe not quite as much as some had expected. Alix the Market Reaction now is clear. It is a weaker euro. Go in and buy bonds, particularly the peripherals that could benefit from qe, and buy equities. A classic qe play from the central bank. Stay with bloomberg daybreak. We will bring you ecb president Mario Draghis News Conference at 8 30 eastern. It will be a fun one. David coming up here, i democratic showdown. We will preview what to expect at tonights democratic debate in houston. Alix and if you are jumping in your car, though ahead and join into bloomberg radio, heard across the u. S. On sirius xm jenna 119 and the Bloomberg Business app sirius xm channel 119 and the Bloomberg Business app. This is bloomberg. David this is what im watching tonight. Did democratic president ial debate is happening tonight in houston. 10 candidates on stage at my old alma mater, abc news. Theres a poll out that has joe biden, the former Vice President , still in the lead, but his lead is coming down, 24 . Elizabeth moran is coming up to 18 . You can see the elizabeth is coming up to 18 . It is the first time we have biden and warren on the stage together. It will be interesting how they take each other on. Alix what is going to be the biggest way they part ways . David i think the biggest bone is the biggest issue, which is are we going to stay a moderate course down the center, or are we going to go to much more progressive ways and restructure the country, which is what Elizabeth Warren whats to do . The interesting question is, will Elizabeth Warren start thinking towards the center for the general . And also, bernie sanders. Alix will joe biden be able to get through the night without a mess up . David hes going to have to hope so. They are going to go after him. Alix coming up, our coverage of the ecb was dances of the, Richard Bernstein the ecb with dan suzuki, jude bernstein portfolio strategist Richard Bernstein portfolio strategist. Portfolio strategist. David welcome to bloomberg daybreak on this thursday, september 12. Alix heres every thing you need to know at this hour. Ecb president mario draghi gets his way. The ecb will restart quantitative easing, cutting its deposit rate facility. David the United States and china are showing each other some goodwill as they prepare to resume trade talks. President trump has okayed a twoweek delay on new tariffs aimed at chinese goods, and china may restart imports of u. S. Soybeans and p and saudi will keep overdoing supply cuts. The new oil minister spoke in abu dhabi. Nobody has ever been as transparent as this. [applause] club raised direct almost 1. 4 billion is the fifth largest ipo in the u. S. This year. The stock begins trading today on nasdaq. Alix no supercool retainers like i had. In the markets, this is pure and simple ecb qed trade in the market. You have the euro moving significantly lower, down 0. 4 . At one point, italian btps hitting a record low of zero of 0. 7 basis points. Its a classic play. Buy equities, sell the currency, buy bonds. The ecb cuts the deposit rate by 10 basis points to 50, restarting qed, planning to buy restarting qed, planning to buy 20 billion euros a month of bonds for the for siebel future. Bernstein, richard advisors portfolio strategist, and Morgan Stanley cio a fixed income joins us as well. Michael, is this what we do . Do you want to buy corporate debt in bunds . Michael at least it takes the pressure off. We had a rally off the back of all of this bad news, and increased worries about what the ecb and fed were doing. Remember, they are getting queued up for next week. A lot of expectation built up over august, and suddenly maybe they wont be able to deliver as much as expected, so i think the markets position for a bit of a rally on the back of a very short selloff. David take a big step back with me for a second. Problem . He i need to understand what the problem is before i understand if there is a potential solution. Dan theres a lot of problems. I think the main problem is that europe sees growth slowing. Theres countries in europe that you could argue are basically in recession come button chile in recession, potentially doing more in that direction. Theres deeper risks and europe. Inflation continues to surprise to the downside, and you have geopolitical risk going on with brexit. David what was announced today by the ecb, is that likely to stimulate growth or inflation . Dan that is the issue. You are seeing this everywhere. Gross, the underlying fundamentals, which is what we focus on, or slowing. We think the risks are rising. The market on a shortterm basis mix a little bit too much. This is probably not going to do a whole lot to stimulate growth over the next six to 12 months. Alix im going to play devils advocate and focus on tltros, the longterm refinancing obligations. Is just a refi rate now. It was 10 basis point higher. At some point, the ecb can offer banks enough money to give it out. Michael the ecb is stuck lower in rates. We saw bank stocks in europe hitting decades low in august. It has come back from those levels. You have rates going more negative, tltros basically support banks ability to loan money. If you have to trade off, how much can they directionally help the economy by lowering Interest Rates and doing qed, and allowing banks to provide credit and not becoming the sole growth provider for europe as a whole . It is a big challenge for the ecb to balance these two risks, and right now theyve been offsetting each other to some degree. Growing, noten sufficiently strong, but there hasnt been much demand for credit because the and things like that. David these are so incredibly important to the economy in europe. As they expand the tltros and pay the banks to loan money, and they have some tiering now, at the same time, they are taking get away with the other hand. Are they helping or hurting the banks . Dan i think it is kind of a wash. If you lower rates on the face of it, that hurts banks. But then they are doing tiering, so that offsets some of the benefit to the european economy. Er the system, it kind of waters down the impact of overall lower rates. Alix does this pave the way for the fed to do something more dramatic next week . Is this the playbook, back to the old qe playbook for central bank easing . Dan i think theres different philosophies. At least that has been the case. That may be changing at the fed, but for the time being, i think the fed is going to be a little bit more conservative, rely on the fact that there are positive signs of growth. The labor market is still strong and still tight in the u. S. Inflation is still low. I think it is a bit of a different story. We get the cpi numbers in a matter of minutes. Really, core cpi expectations are at 2. 3 , so it is a bit of a different story in the u. S. Versus ecb. So i dont think that if the playbook. Ecb has consistently been more aggressive and faster acting than the fed, so i dont know that this sets up anything. They are probably going to cut, but i think what people are missing is that you are in this scenario where people are getting very excited about further easing. If we get an easing cycle, it is because the fundamentals are bad, and that is a bad story for risk assets overall. Go . D how low can it can we keep going into negative territory lower and lower . Michael economists talk about the reversal rate, the rate at which it gets so negative that it becomes counterproductive for the health of the Financial System and the ability to generate credit outside of government provision, which is where you dont want to go. You dont want the Banking System to stop working in the economy has to rely on the government or the central bank to provide credit, which occurs in some emerging markets. There is a point at which it becomes counterproductive. If you look at switzerland, they have moved even lower than this, and switzerland is doing ok. Theyve found ways to get around it such that the banking is ok, the economy is ok. Is it helping . Not sure, but im not sure the central bank has any other options but to try because they do have an inflation mandate. Unless they change it somehow, they are expecting 2 . In japan, e bank of japan gave up a number of years ago before 2012 and said, we cant do anything about it. Too bad. And they tried, but it did work in japan. They did get inflation up. So i think if you push hard enough, it might work. But remember what japan did. They depreciated the Exchange Rate almost 50 versus the dollar. The europeans are not going to be allowed to do that. Alix and i think literally, we are waiting for the tweets from the white house as we see the currency dropped like a stone. Dan, do you feel like this makes the case for fiscal stimulus in europe more or less likely . Dan this alone, probably because they pulled out all the stops here, they met expectations for all of the potential stimulus points, so i think from that perspective, it makes it slightly less negative. But i think the case for fiscal stimulus is still very strong. That is the issue, there is too much reliance on Monetary Policy , where Monetary Policy has its limits. All the major central bankers have come out and said that themselves, so it is not a big surprise, but people arent willing to do major fiscal stimulus outside of more dire economic signals. I would argue you are starting to get those signals, but i think people are a little hesitant to pull the trigger. Alix do you like anything in europe right now . Dan i would say we are kind of neutral on europe. We went from having zero exposure to europe over the last few years to neutralizing that underweight. We have actually gotten incrementally more positive on eupever the last six months or so, but i would say it is hardly the most exciting region in the world. Actually think china, despite everything going on with trade, is more exciting from a risk perspective. Versuson currencies bonds versus equities, you wake up this morning and see this announcement. Where do you move your dollar or euro or yen from and to . Michael weve been positive on european peripheral bonds because qe is a better is a better performer in spain. Not so much in italy. Are stills higheryielding man German Government bonds, french government bonds. If you are a dollar investor you hedge the euro back to dollars, you dont take the euro risk. You have a higheryielding instrument then u. S. Treasuries and even u. S. Corporate bonds. The european bonds are actually still interesting from that perspective. At the margin, weve been happy to maintain. Than thes me happier ecb that would failed to deliver a complete package. We could argue about the intensity of the package come but the package, but at least they did the whole thing. That is a great perspective. Thank you so much. Kushmauki and michael will be sticking with us. We will bring you ecb president Mario Draghis News Conference live at 8 30 this morning eastern time. Coming up, opec puts more pressure on members to input production cuts. This is bloomberg. ,lix opec plus tells members implement those production cuts you promised. The Oil Ministers says any deeper cuts will have to wait until december. We have made our voluntary reductions to end of year. Definitely we will have the meeting in december. As i said, we would review at c what we need to do, be at any type of measures we require. I dont want to prevent the next gmmc. Alix the iea says a surplus is expected next year. With us still, dan suzuki of Richard Bernstein and Michael Kushma of Morgan Stanley. Here is ao buy energy value trade . Is there catch up, or is there still too much risk and supply. Dan we are not huge fans of oil or energy here. You are talking about cyclical assets, so i think our view is that growth is pretty strongly sling and weakening, and that is not a time to go oil assets now. It is a very news driven sector. It will have a lot of ups and downs and shortterm movements. That is not going to be good for oil demand. I think that is the bigger issue. People always talk about when before the cycle turns, there is tight supply. You always underestimate the impact of demand slowing when things really get bad. David thats Energy Stocks. What about energy bonds . Michael same issues. A lot of the Big Oil Companies are obviously very wellcapitalized and high quality, and they are pretty safe overall. A lot of the smaller, high yield companies, suppliers of equipment in the shale business in the trucking business, it is a very volatile business, and you have to be very careful about investing in those specific companies because Energy Prices and oil prices are going to remain volatile. Riskier companies, are they borrowing less . Michael theres been less investment. Theres been less supply of bonds on that front, yes. Alix when you look at oil, how does that relate in terms of Inflation Expectations . It is not what the fed looks at, but they look at Inflation Expectations. Is ofl our view flatlining Energy Prices. I dont think the fed or economists have a strong view of where oil prices will be. Alix but in terms of adjusting Inflation Expectations and how it gets routed more to the downside. Michael oil prices in shocks, oneave two positive, when negative. It lowers aggregate demand and puts less money in pockets in general, which puts downward pressure on the economy. Each economy in the world has different sensitivity to that. Higher oil prices actually stimulate investment and have a neutral effect on the economy, while europe is the opposite. Higher oil prices creates a stagflationary type of environment. David if you look historically, how much of the Inflation Expectation was driven off of oil at a time when opec could get together and raise the price of oil . If that part of the phenomenon we are seeing . Here in the unit states, we are struggling to get to 2 . Is that part of the explanation . Dan i think if you look at the correlations, theres a huge correlation between oil prices and Inflation Expectations. I think thats the one we are looking at today. Possibly you could see a pickup in oil prices over the short term. That would get Inflation Expectations high, and addition to the fact the underlying inflation indicators are rising. Typicals the fed in a late cycle rock and a hard place. It is one thing to be cutting rates when inflation is low, but if core inflation at 2. 3 this month and 2. 4 next month, and oil prices are rising, that puts the fed in a tough position. Alix where do you sit on the momentum value, gross value trade . Ross value growth value trade . Dan the reason they are intertwined, if you look at the components of the growth indices and value, growth is really just a big play on tech, and value is a big play on financials. When you look at the components of that, that is what is really going on. Financials are very rate sensitive to what youve been seeing over the last few days. At the same time, tech has had a bit of a pullback. That is the reason momentum has pulled back. If that is really your view, if the whole dynamic is dominated by these two sectors, why not just talk about the sectors . Both of those we dont like because they are very cyclical. The question to us is missing the point. Youre debating one cyclical versus the other, when i dont think you should own either. Alix fair point. Dan suzuki and Michael Kushma staying with us. Join us for bloomberg commodities edge at 1 00 new york time. Where the opportunities are. And david we have it. President trump has tweeted now about the European Central bank. They are trying and succeeding to depreciate the euro against a very strong dollar, hurting u. S. Exports. Who could fix that . Its the fed. The fed sits and sits and sits. They get paid to borrow money while we are paying interest. Alix to be completely fair, hes not wrong. The euro is lower. The dollar is stubbornly higher. David hes not wrong at all. On the other hand, im not sure it is a good strategy to go into negative Interest Rates so we can borrow more money as a country. Alix that has not worked out. David in places like zimbabwe, for example. Alix coming up, turkeys surprise. Turkeys central Bank Delivering a rate cut that exceeds forecasts. Could president erdogan actually be right . This is bloomberg. Viviana you are watching bloomberg daybreak. Job cuts on the way at British American tobacco. By january, the new ceo plans to eliminate 2300 positions. They will affect one in five management positions. In major markets, cigarette declining. British american faces pressure to jumpstart its underperforming portfolio of cigarette alternatives. For months, oracle grappled over whether to disclose coceo mark hurd was ill. He is taking a leave of absence for unspecified Health Related reasons. For more than a year, he has been in and out of the public eye. Oracle making the announcement after bloomberg contacted the company in relation to a story about hurds health. Thomas pikettys last bestseller help put equality at the sitter the economic debate. Now he has a new book on how governments should get rid of billionaires. The french edition of capital and ideology was released. You will have to wait until next year for the english edition. His last book has sold more than two and a half million copies. That is your Bloomberg Business flash. David we want to turn back now to turkey. At the top of the broadcast, turkey delivered a rate cut that was larger than expected, and the lira gained against the u. S. Dollar as traders heaved a sigh of relief, but the cut wasnt as deep as some had feared. Dan suzuki of Richard Bernstein morgan l kushma is of Morgan Stanley are still with us. The lira goes up every time they cut rates. Inflation is coming down. Is it possible that president erdogan was right . That statementy in itself is right dan clearly that statement in itself is right. Unlike a lot of places in the world, maybe you could argue that some of the worst might be behind it. If you look at pmis and industrial growth production numbers, they are seeing some recovery. I think they are teetering on coming out of the yield curve inversion. It is possible that they may be are already on the recovery stage, while the rest of the world is still weakening. Alix it brings up the relationship between politicians and central bankers, which is obviously front and center in europe, as well as in the u. S. How does this evolve . Its become politicized, i think because inflation refuses gup central bankers are failing to deliver on their objectives at a time when growth is weak, low, andn is central bankers are cautious by nature. They dont want to create problems. Their goal is to prevent relation, not because inflation, so the psychology is slowly shifting, but it is a difficult to get an institution set up to make sure inflation sets low to suddenly raise inflation. Today,even in the ecb they by more and more assets they buy more and more assets, so is it inevitable that they get more political . Dan i think it is getting more political as the underlying growth story is slowing. Butnamed the u. S. , europe, this is happening in every country of the world. It is happening in india. They got a new central who cut rates. I thicket is a sign of more desperate times. Alix thank you guys very much for joining us. Coming up, we are moments away from Mario Draghis News Conference after the ecb cuts deposit rates by 10 basis points and restarts qe. Bonds, sell the euro. This is bloomberg. Alix the main event was the ecb classic play, cell euro, by bonds. If you take a look at equity markets, that is the play. Eurodollar taking it another like lower on a huge move into the bond market. Btps hitting a record low. Nd yields moving low but not hitting a record low. In terms of inflation in the energy wee backout are seeing 2. 4 year on year basis. On a month on month basis, up. 3 . In line with what we saw in july. That is an interesting move as well on the flipside when you have europe struggling and having to throw everything but the kitchen sink. David they are up x crude, x energy, which is higher than it has been in some time. Lets bring in Michael Mckee. Ais is a bit of a supplies surprise to the upside on inflation. Michael it does not change the dynamic, it ingests the dynamic. It adjusts the dynamic. The fact that they have to be are finallywe seeing inflation start to firm in the United States. You look at the core rate pce the fed follows, it generally. 5 low cpi. That puts the core pretty much at the fed target. The idea they should cut rates to zero is not going to go over well. Alix can it stay there, meeting when you have the struggles with trade and europe can we sustain this kind of inflation . If the in theory we can u. S. Economy is growing at a reasonable pace. So far, it has been. The question is what happens when we see the economy start to slow, which the preliminary data suggest. Increase was achieved with 1. 9 decline in Energy Prices. Energy prices have firmed a little bit. We will see what happens with opec, if they can drive prices higher. If furthervid tariffs going to affect, particularly the ones in december, what is that likely to do to the cpi number . Michael in theory it should raise prices, because imports will be more expensive. If something is made in china, it will cost more. We have not seen that yet, which is an interesting development. We have not seen wages starting to push up inflation and maybe that is happening now. We are at a point where jay powell wanted to do what mario draghi just suggested, we will keep q. Week going into we hit our inflation target. It would not keep qe going until we hit our inflation target. Alix which puts the fed in a bind in terms of the dollar. Michael there does not seem to be much relief on the dollar front for the fed because at this point we are the best investment in the world. David you are not paying attention to president trumps tweet. Michael i have bad news for him. Draghie see mario shuffling his papers as he prepares to give a press conference. Michael mckee, thank you for joining us. Cpi pops 2. 4 . Now lets listen into mario draghi and his swansong as he delivers everything but the kitchen sink. Pres. Draghi we welcome you to our press conference. We will now report on the outcome of todays meeting, a beating of the governing council. Based on our economic and Monetary Analysis, we have conducted a thorough assessment of the inflation outlook. Account theinto latest Macro Economic projections for the euro area. As a result, the Government Council took the following decisions in pursuit of its price stability mandate. First, as regards the key ecb Interest Rates, we decided to lower the Interest Rate by 10 0. 50 . Ints, to on the main rate refinancing operations and the rate on the marginal Lending Facility will remain unchanged at the current levels of 0 and 0. 25 , respectively. We now expect the key ecb at thet rates to remain present or lower levels until we have seen the inflation outlook robustly converge to a level sufficiently close to but below 2 . Within our projection horizon, and such crgce has been consistently reflected in underlying inflation dynamics. Second, the governing council decided to restart net purchases under its Purchase Program at a monthly pace of 20 billion euro from november 1. We expect them to run for as long as necessary to reinforce the accommodative impact of our end shortly and to before we start raising the key ecb Interest Rates. Third, we intend to continue thevesting in full principal payments from maturing securities purchased under the asset Purchase Program for an extended period of time past the date when we start raising the key ecb Interest Rates, and in any case, for as long as necessary to maintain favorable and anty conditions ample degree of monetary accommodation. , we decided to change the modalities of the new series of quarterly targeted longerterm refinancing operations, tltro three to preserve Favorable Bank Lending Conditions, ensure the smooth transmission of monetary support thefurthers accommodative stance of Monetary Policy. The Interest Rate in each operation will now be set at the level of the average rate applied in the euro systems main refinancing operations over the life of the respected tltro. For banks whose eligible net benchmark,eeds the rate applied in tltro three operations will be lower and can be as low as the average Interest Rate under the deposit facility prevailing over the life of the operation. The maturity of the operations will be expanded for two to three years. Support theder to bank based transmission of Monetary Policy, the governing council decided to introduce a ier system for reserve renumeration, in which part of Banks Holding in excess liquidity will be exempt from the negative deposit facility rate. Releases with further details of the measures taken by the governing council will be published this afternoon at 3 30 p. M. Reiteratedng council the need for a highly accommodative stance of monetary , andy for a prolonged time continues to stand ready to adjust all of its instruments as appropriate to ensure inflation in a sustained manner, in line with its commitment to symmetry. Todays decisions, when taken it todays decisions were taken in response to the continued shortfall of inflation with respect to our aim. Incoming information since last governing Council Meeting indicates a more protracted weakness of the euro area economy. The persistence of prominent Downside Risk and muted inflationary pressures. Reflected in the new projections, which show a further downgrade of the inflation outlook. Time, robust employment growth and increasing wages continue to underpin the resilience of the euro area economy. With todays comprehensive package of Monetary Policy decisions, we are providing substantial monetary stimulus to ensure that financial conditions support theable and euro area expansion joint the ongoing buildup of domestic price pressures, and thus the sustained convergence of inflation to our mediumterm inflation aim. Let me now explain our assessment in greater detail. Starting with the Economic Analysis. Increased. 2 gdp quarter on quarter and the Second Quarter of 2019 following a rise of 0. 4 in the previous quarter. Data andeconomic information continues to point to moderate growth in the Third Quarter of this year. The slowdown in growth reflects the prevailing weakness in terms of International Trade in an environment of prolonged global arertainties, which particularly affecting the euro area manufacturing sector. Servicesme time, the and construction sectors show ongoing resilience in the euro area expansion is also supported by favorable financial conditions, further employment gains, and rising wages. The expansionary euro area physical stance and the ongoing Slower Growth in global activity. This assessment is broadly 2019cted in the september ecb staff Macro Economic projections for the euro area. These projections foresee annual inl gdp increasing by 1. 1 1. 4 in 2021. 2020, 2019red with the june Macro Economic projections, the outlook for real gdp growth has and revised down for 2019 2020. The risks surrounding the euro area Growth Outlook remain tilted to the downside. These risks mainly pertain to the prolonged presence of uncertainty related to geopolitical factors, the rising threat of protectionist, and vulnerabilities in emerging markets. To estimates, euro in augusttion was 1 2019, unchanged from july. Lower Energy Inflation was offset by higher food inflation. The rate of inflation, excluding food and energy, was unchanged. On the basis of current futures prices for oil, headline inflation is likely to decline before rising again toward the end of the year. Measures of underlying inflation , andned generally muted indicators of Inflation Expectations stand at low levels. While labor cost pressure strengthened and broadened amid high levels of Capacity Utilization and tightening labor markets, their passthrough to inflation is taking longer than previously anticipated. Over the medium term, underlying inflation is expected to increase, supported by our Monetary Policy measures, the ongoing economic expansion, and robust wage growth. This assessment is also broadly reflected in the september 2019 ecb staff Macro Economic projections for the euro area, which foresee annual h icp inflation at one point to this 1 in 2020, and 1. 5 in 2021. Compared with the june 2019 Macro Economic projections, the outlook for hic be inflation is being revised down over the projection horizon, reflecting lower Energy Prices and the weaker growth environment. Turning to the Monetary Analysis , brought money growth increased to 5. 2 in july after 4. 5 in june. Sustained rates of brought money growth reflect ongoing Bank Credit Creation for the private sector and low opportunity costs of holding m3. The narrow monetary aggregate, m1, continues to be the main contributor to broad money growth on the component side. Of annual growth rate financial corporations remain unchanged at 3. 9 in july 2019. Of annual growth rate overall loans to nonfinancial corporations continues to be solid, although shortterm loans, which are more sensitive to the cycle show signs of weakness. The annual growth rate of loans to households stood at 3. 4 percent in july after 3. 3 in june. Continuing its gradual improvement. Overall, loan growth is still benefiting from historically low bank lending rates. The Monetary Policy measures we have taken today, including the more accommodative terms of the new series of tltros, will help safeguard Favorable Bank Lending Conditions and will continue to support access to financing, in particular for small and mediumsized enterprises. , up crosschecked of the outcome of the Economic Analysis with the signals coming from the Monetary Analysis confirms that an ample degree of monetary accommodation is Still Necessary for the continued sustained convergence of inflation to levels below but close to 2 over the mediumterm. In order to reap the full benefits from our Monetary Policy measures, other policy contribute more decisively to raising the longerterm growth potential. Supporting aggregate demand at the current juncture and reducing vulnerabilities. The implementation of structural policies and euro area countries needs to be substantially stepped up to boost euro area productivity and growth potential. Reduced structural unemployment and increase resilience. Country specific recommendations should serve as the relevant signpost. Policies, theal expansionary euro area physical stance is currently providing some support to economic activity. In view of the weakening Economic Outlook and the continued prominence of Downside Risk, governments with physical with fiscal space should act in an effective and timely manner. In countries where public debt is high, governments need to pursue prudent policies that will create the conditions for automatic stabilizers to operate freely. All countries should reinforce their efforts to achieve a more growth friendly composition of public finances. , the transparent and consistent implementation of the European Unions fiscal and economic government framework remains essential to post to the resilience of the euro area economy. Ofroving the functioning economic and Monetary Union remains a priority. The governing Council Welcomes the ongoing work and urges further specific and decisive steps to complete the Banking Union and the Capital Markets union. Now we are at your disposal for questions. Good afternoon. Be aboutquestion would the dynamic in the room. Going into the meeting, we have seen quite a vocal opposition, especially to the restarting of qe. Me and the others here would like to know how much support each of the instruments that were eventually adopted got, and how much support was there . My second question is about your app program. It is effectively your apb program. It is effectively openended. It means you will end up buying bonds or assets for months or years. The question is do you have the space to do it . Have you considered changing limits or adding other assets to the program . You. Pres. Draghi thank you. You the, before giving chemistry of the meeting, let me spend a word trying to explain what we have actually done. As i sketched in the introductory statements, there were three elements that prompted action. Find in my you would cintra speech. After that the case became Even Stronger because the protracted slow down in the eurozone economy is more marked than expected is the first element. The second element is the persistent and the persistence of Downside Risk, of trade nature but also geopolitical nature, in the euro zone. By the way, our baseline scenario that contains the third reason for acting, namely the downward revision in projected , with Inflation Expectations at this low level and current underlying inflation muted. This scenario is also relatively favorable because it does not contain the case of a hard brexit. The probability of which has gone up over recent time, and it does not contain some of the trade measures, the trait escalation that has taken place since august. With this relatively favorable baseline scenario, there was a downgrade in inflation and Inflation Expectations. That is over the horizon. That is what prompted the measures we have taken. Explainingd a word them and that i will answer your point more specifically. The lowering of the deposit facility rate, together with the rate forced Forward Guidance operates throughout the yield curve, especially in the short and mediumterm segments. There is au see different Forward Guidance today. Dependent. Give a pretty good guidepost, a clear guidepost for rate expectations by linking our policy to more stringent conditions for the inflation outlook. Horizon,projection projected inflation will not only need to converge, but also as i read an introductory statements, also stabilize around a level sufficiently close to but below 2 . The reference to level sufficiently close to but below 2 signals we will not see projected in nation to significantly increase from the current realized and projected inflation fears, which are well below the levels we consider to be in line with our aim. Our guidance would remain forwardlooking, but at the same elements thatins are that protect us against the risk of overreacting to transitory shocks of inflation, as well as against forecast and measurement errors. We would emphasize convergence should be robust. That is important. Also important is the reference to underlying laois and that we have doing cash underlying inflation that we have underlying inflation that we have to increase. That is the explanation of the first few elements of todays decision. Now, i can also give you an explanation of why the restarting is appropriate. We can defer this to the next andn, perhaps, not let me now move to the other point. Your first question was about the chemistry of the meeting. Thing thatt from one ,here was unanimous consent namely that fiscal policy should become the main instrument. It is quite clear that in order to raise demand in ineffective investment, you see the language of the introductory statement, after many years i think of being the same about fiscal policy and how it has changed. There was complete agreement about that. What is happening in other jurisdictions, where inflation rates are higher, and you look at monetary policies are broadly comparable in terms of easing capacity, you see fiscal policy did play a much more active role good i am talking i am talking not only about this year, im talking about the last six or seven years. Almost all of the things youd see in europe, the creation of more than 11 million jobs, the recovery, the sustained growth for several quarters, were by and large produced by our Monetary Policy. There was very little else. There were Structural Reforms in some countries, in some countries joint now it is time in some countries. Now it is time for physical policy to take charge. Calond for fis policy to take charge. There was agreement concerning Forward Guidance and the rate cut and the reinvestment and the tltro. That that part was by and large agreed. Then there was more diversity of views, as it was preannounced by statements and all newspapers, wires, television, and so on. More diversity of views. Consensus, it was the the consensus was so broad there was no need to take a vote. Assured a verys broad consensus. There was no need to take a vote. There was such a clear majority. I will say one word about where the main differences lied in the discussion. There was a full agreement about the need to act. The difference of views were about the severity of the outlook. In other words, the majority of the governing council believed the outlook was deteriorating in expected. Ter than the revision in their growth and inflation projections granted full action. Others viewed this deterioration with a little more caution. A second point was about the need to act now. As usual you have all of these views that say lets wait and see. The governing council decided to act now. The third is about the app. Priateness of the concernsn to act now Inflation Expectations. We have seen not only the ones now at low levels, but we see that Inflation Expectations are not deanchoring but are reanchoring at levels between 0 and 1. 5 , which is not our aim. That is why the governing council, in full consistency with its mandate, did decide to act now. Powerful,e is quite both in the short term and the long run and designing action over the coming months. Appropriateness of these instruments, because something this is appropriate only for risk of deflation, others thought the level of Interest Rates was already so low it does not need action on the app. The majority of the governing council believe action was. Arranted that was the chemistry. Now, the limits. There was no appetite to discuss the limits, for one good reason. We have relevant headroom to go thisr quite a long time at reason without the need to raise the discussion about limits. I think we will stop here. Let me take your point on the length of the program and also how long you think those measures are needed. One of the surprising elements of the proposed package was that if the app comes in with an unlimited amount of time. What are you expecting . How long does this need to prevail in order to get inflation back to target . In your
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