The minutes of the October meeting of the European Central Bank’s Governing Council show some signs of doubt about the growth picture, though members felt it was too soon to change its assessment, explains Peter Vanden Houte, Chief Economist at ING.
Key Quotes:
“While there was broad agreement that at present the risks to growth could still be considered to be balanced overall, a remark was made that a number of arguments pointed towards risks to the growth outlook tilting to the downside. Indeed, all members agreed that the risks related to the external environment were pointing downwards.”
“Italy was mentioned only in general terms (with some tightening of monetary conditions in the country), there was no discussion on how the ECB would have to cope with a potential escalation of the situation.”
“Our take on the discussion in the Governing Council is that the assessment of the growth outlook could be somewhat more downbeat in December, without becoming outright pessimistic. Therefore, it is still unlikely that the ECB will refrain from ending its net asset purchases in December. However, we wouldn’t be surprised if December’s statement has a whiff of doubt in it, which would limit expectations of a rate hike to at most one in 2019. As for a new TLTRO, it is probably too soon to pencil it in now. A new TLTRO is only likely to be considered if the situation in Italy really deteriorates in the course of 2019.”
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