Business News

CCTV Script 09/12/16


This is the script of CNBC's news report for China's CCTV on December 9, Friday.

Welcome to CNBC Business Daily, I'm Qian Chen.

The European Central Bank (ECB) announced a continuation of the bank's generous asset-buying program on Thursday, although a reduced pace of purchases is set to start from April next year.

Current asset purchases of 80 billion euros ($86 billion) a month were due to end in March 2017, but will now be extended until at least December 2017 and will be cut to 60 billion euros a month from April 2017, the bank said in a statement. Benchmark interest rates were left unchanged.

The euro zone's central bank was widely expected to announce it will continue with its massive trillion-euro bond-buying program at its meeting on Thursday, however some analysts were surprised at the details of the announcement.

"The ECB just surprised by announcing that they will extend their QE (quantitative easing) program by at least nine months, though at a smaller pace," Carsten Brzeski, a chief economist at ING, said in a note.

"Even without calling this tapering, the ECB just announced tapering. It is the combination of extending and tapering that we thought would not yet happen as it could risk an unwarranted increase in bond yields."

The ECB did add a caveat stating that if "the outlook becomes less favorable or if financial conditions become inconsistent with further progress towards a sustained adjustment of the path of inflation" then it would increase the program again in terms of size and/or duration.

President Mario Draghi spoke at a press conference after the announcement, trying to dampen talk that the central bank was "tapering" its asset purchases. He dismissed the idea that the ECB's adjustment to the pace of its asset purchase program could be seen as easing off.

[MEGAN GREENE, Manulife Financial Chief Economist] "It was surprising that they decided to reduce the amount of bond purchases every month from 80 billion to 60 billion euros. Now Draghi insists that's not tapering, I sort think he's arguing that technicality. He says its not tapering because they are not reducing it down to zero, but surely its the first step towards that. That being said, I don't think the ECB is able to get out of the markets for years to come."

Draghi also outlined the bank's inflation forecasts over the next three years with ECB members keeping their estimate for consumer prices to grow this year by 0.2 percent.

Members now expect inflation at 1.3 percent next year, marginally higher than a previous forecast for 1.2 percent back in September. 2018 inflation was revised slightly lower. A reduction in asset purchases is seen as a risk by some economists and has been likened to a euro zone version of the so-called "taper tantrum" seen in the U.S. in 2013.

ECB members, in the run-up to the meeting, had emphasized it was "crucial" to stick with easy financial conditions particularly with the continent's stubbornly low inflation levels.

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