ECB's Surprise Taper Decision Comes With Economic Risk

Summary

• Most investors had expected the ECB to delay any changes to its purchases until at least the next policy meeting, especially after comments from senior members suggesting the need for patience.
• Unsurprisingly, the market reaction to the hawkish surprise saw interest rates rise, peripheral spreads widen and equities fall.
• Ongoing negotiations among European leaders could, of course, change the picture.

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By Eric Winograd

At its March 10 meeting, the European Central Bank (ECB) surprised the market by announcing an acceleration of its tapering program - wrapping up securities purchases earlier than anticipated. Most investors had expected the ECB to delay