ECB Bonds

Whatever You Do, Don't Say Taper

Draghi, President of the ECB and Weidmann, President of German Bundesbank shake hands with students during the Generation Euro Students’ Award ceremony in Frankfurt
For once, Mario Draghi and Jens Weidmann might actually see eye to eye. Source: Reuters

“Taper…tantrum,” is how that psychological word association test would probably go with investors. The exercise would raise ugly memories of when the US Federal Reserve first surprised financial markets back in 2013 by suggesting the end was near for its massive injections of cash into the US economy, known as quantitative easing. Markets tumbled.

Such a tantrum is exactly what the European Central Bank is trying to avoid as it enters a crucial meeting this week. The Frankfurt-based central bank’s governing council will announce on Thursday what it plans to do with its own loose monetary policy, which has been propping up the euro zone’s lackluster economy for nearly three years now.

The best way to stop a tantrum? Don’t talk of a taper. In that vein, the ECB seems increasingly unlikely to actually announce an end-date for the trillion-euro bond buying program that has been at the center of its efforts to boost the continent’s economy. Even the German central bank, long a critic of the ECB’s policies, seems unwilling to risk a tantrum now.

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