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Analysts at Rabobank explained that the June meeting had a distinctly dovish market impact.  

Key Quotes:

“The main cause is the more explicit forward guidance.  Expectations have clearly been pushed to the  later  end of 2019. The 1m Eonia forward curve implies a first deposit rate hike by December 2019.”

“The new guidance is still consistent with our call for a September 2019 deposit rate hike, but we admit that it skews the risks to a prolonged period of low rates. The key question is how high the ECB makes the data-dependent hurdle for a first hike. Judging by the curve, the market currently expects this threshold to be quite high, so that it may delay the hiking cycle.”

“If the economic slowdown is less severe than feared and inflation picks up, there is room for some hawkish surprise if this forces the ECB to act early in 2019H2.”

“The bottom line is that, as a result of this newly established link to inflation and the shift of GC members’ focus towards rates guidance, we would expect economic developments to have an increasingly pronounced effect on rates as the communicated ‘earliest hike date’ draws closer.”

“Banks repaid only EUR 11bn of TLTRO-II loans. This amount is too insignificant to affect money market rates, which remain well-anchored to the ECB’s deposit rate.”

“However, if repayments do pick up substantially in the coming quarters, this could put upward pressure on rates.”

“We think the ECB may explore fresh (T)LTROs in the future, but we would expect these to have a tenor closer to 2 years.”