Aline Schuiling, senior economist at ABN AMRO, points out that ECB’s current forward guidance on interest rates is that rates will ‘remain at their present levels at least through the summer of 2019.
Key Quotes
“Given that our forecasts for GDP growth and inflation are well below those of the ECB, we expect the ECB to keep interest rates on hold in 2019. We expect the forward guidance on interest rates to change following further downgrades to the outlook, and we think that the central bank will signal that interest rates will be left on hold through 2019 by the June meeting.”
“We expect a 10bp hike in all the policy rates in March 2020 and a second 10bp increase in September 2020. Given the subdued macro environment, we think that the risks are skewed towards even later rate hikes. We do not expect the ECB to end reinvestments until late in 2021.”
“Finally, we expect a TLTRO extension to be announced in March 2019. With regard to other policy instruments, ECB president Mario Draghi has mentioned that the ECB intends to keep liquidity as available as it needs to be, that the ECB is aware of the factors that will affect liquidity in the next couple of years, and that it will discuss this at some point in future. We expect the ECB to make changes to the TLTRO programme in March, to allow banks to repay the funds over a longer period than currently.”
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