Nick Kounis, Senior Economist at ABN AMRO noted that the ECB is focusing on the forward guidance on interest rates and reinvestments to provide continued stimulus.
Key Quotes:
“We continue to think that the ECB will downgrade its economic outlook in the coming months and will therefore change its tone. However, this has implications for the other tools at its disposal rather than net asset purchases.”
“Indeed, the ECB President continued to signal that ‘significant monetary stimulus will still be needed’ and that ‘even after we end our net asset purchases, monetary stimulus will continue to be provided by the guidance we have given namely that we expect to keep interest rates at their present levels at least through the summer of 2019 and to maintain the stock of assets on our balance sheet by reinvesting maturing bonds purchased under the asset purchase programme for an extended period of time after the end of our net asset purchases’.”
“Indeed, we found it noteworthy that Mr Draghi asserted that the ECB’s forward guidance can change if the economic outlook worsens.”
“Indeed, a downgrade of the ECB’s growth forecasts over coming months could well trigger the ECB to signal that the period of unchanged rates and reinvestments will last even longer. “
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