According to the latest headlines flashing on the wires, via Reuters, citing four sources close to the matter, sluggish growth has not weakened the European Central Bank’s resolve to end a bond-buying scheme later this year but could make it more cautious about signalling interest rate hikes.
Key points:
“¢ There was unusual unity among ECB rate-setters about ending the bond purchase scheme after a short taper, and that the real debate would be about the future path of interest rates.
“¢ Recent soft indicators suggest growth is levelling off “” settling into a lower gear but still performing above potential, which will continue to generate inflation.
“¢ Higher oil prices and a weaker euro are likely to mean an increase in some of the ECB’s headline inflation projections next month.
“¢ Core inflation projections will not change significantly when the new estimates are released, however, and some growth forecasts are likely to be cut.
“¢ Expected timing of the first rate hike, roughly six months after the ECB ends bond buys, could be challenged if the growth environment weakens further.
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