Despite growing uncertainty around the strength of the Eurozone recovery, little underlying inflationary pressure and possible further market turmoil, the European Central Bank seems determined to focus on long-term trends, suggests Petr Krpata, Chief EMEA FX and IR Strategist at ING.
Key Quotes
“After a speech by ECB chief economist Peter Praet last week, the only question is how much detail the ECB will be willing to present.”
“We still don’t think the central bank will easily give away flexibility and room for manoeuvre on quantitative easing in a situation where downside risks to the economic outlook have increased and political risks (be it from Italy or later this year from Brexit) could easily reemerge.”
“It is a close call between trying to buy more time with hawkish words and announcing explicit details. Given Praet’s comments, we expect the ECB to announce another recalibration of QE, i.e. an extension of QE at a reduced pace of €10 billion per month at least until December 2018.”
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