Analysts at Rabobank suggest that ECB meeting is a crucial time to discuss the future of the asset purchase programme and although this could mean that no consensus may be reached in next week’s meeting already, it suggests that President Draghi will at least send strong signals that an official announcement will follow in July.
Key Quotes
“The earlier-than-expected moderation of economic data as well as the political turmoil in Italy are adding some complexity to the ECB’s deliberations. Ultimately, however, we do not believe that either of these will cause the ECB to meaningfully extend the asset purchase programme: the ECB is approaching the limits of the programme, and as we described yesterday, the APP was never designed to deal with stress on a specific country’s spreads.”
“We therefore foresee an exit by the end of the year. That said, the uncertainty hanging over the Eurozone economy will force the Governing Council to manage rate expectations carefully, so that the end of QE does not trigger undue expectations of rate hikes. This may require the ECB to change its communications and become more explicit on what ‘well past’ means. We continue to see rates on hold at least until September 2019.”
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