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ECB to remain on hold in September - Goldman Sachs

FXStreet (Łódź) - The Goldman Sachs team of economists believe that the ECB will remain on hold in December, refraining from modifying interest rates or adding further non-standard measures, as recent inflation and activity data has been disappointing.

Key quotes

"Having announced (in its view) a substantial package of additional easing measures in June we believe the ECB governing council is likely to wait to assess the impact of these measures on lending, growth and inflation."

"Unless there is a significant further shock to the Euro area economy, our economists expect the ECB to remain broadly on hold until the December meeting."

"Moreover they continue to see the hurdle to implementation of sovereign QE as high, owing largely to the well-known institutional and political constraints in the Euro area."

"Nonetheless weak economic data combined with recent comments by ECB president Mr. Draghi and subsequent bond market action point to a higher likelihood of QE being priced by investors."

"Our economists also think that while Mr. Draghi is reluctant to pull the trigger, the ECB's rhetoric will keep the prospect of sovereign QE on the table, as a bulwark to the easing of financial market conditions."

"Given this possibility we look at how equities have responded to the various episodes of QE in the past."

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