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Elliot Clarke, Research Analyst at Westpac, notes that the ECB met for their July meeting and the guidance provided on policy was the same as at the June meeting.

Key Quotes

“Notably, rates remaining on hold “through the summer” was confirmed to mean that the first rate hike would not be seen until after summer’s end. Ergo, the stance of policy in Europe will be unchanged until at least September or October 2019, with the exception of the end of asset purchases at December 2018 (which is already priced into markets).”

“To see a rate hike cycle start at that time, economic growth needs to remain broad based such that wage and income growth accelerates further, and inflation develops a robust foundation. From less than 1.0%yr at June 2018, core inflation has a long road to travel to be near (but below) 2.0%yr on a sustained basis as the ECB intend.”

“Worth noting from the Q&A was: the ECB’s comfort with the Euro’s depreciation in 2018, which is seen as the result of the US’ outperformance on growth and policy; and yet another call for fiscal reform from President Draghi. The latter is certainly necessary if activity and job growth is to remain above trend in coming years.”