ECB: October QE extension was the last one? – Danske Bank
Aila Mihr, Analyst at Danske Bank, notes that recent remarks from ECB members have repeatedly hinted at a preference for the October QE extension to be the last one.
“Yves Mersch: ‘Market would be wrong to expect another QE extension’; ‘CB toolbox not limited to asset purchases’.”
“François Villeroy de Galhau: ‘There shouldn’t be excessive focus on the net QE purchases.’”
“Benoît Cœuré: ‘I hope that asset purchases will end in September’ The minutes from the October meeting also revealed that ‘several members’ favoured decoupling the forward guidance on QE from the requirement for a sustained rise in inflation, instead linking it to the overall monetary policy stance, i.e. the combination of new asset purchases, the existing stock of QE assets plus reinvestments and the forward guidance on policy rates. If this view were to become more prominent in the Governing Council over coming months, it would open up the possibility of the ECB ending the QE programme in 2018, even without a clear pickup in inflation.”
“Markets are so far still very complacent, pricing in the first ECB 10bp hike not before July 2019. Hence, further hawkish comments in coming months hinting at the possibility the ECB could phase out QE purchases earlier than markets are currently looking/wishing for could be a trigger for a reassessment of current market expectations.”