ECB: Account reveals heightened concerns about inflation – ABN AMRO
|Nick Kounis, head of financial markets research at ABN AMRO, points out that the account of the ECB’s June monetary policy meeting, which was pre-Sintra, suggested that the majority of the Governing Council stands firmly behind the President.
Key Quotes
“The account notes that ‘there was broad agreement that, in the light of the heightened uncertainty, which was likely to extend further into the future, the Governing Council needed to be ready and prepared to ease the monetary policy stance further by adjusting all of its instruments, as appropriate, to achieve its price stability objective.”
“Potential measures to be considered included the possibility of further extending and strengthening the Governing Council’s forward guidance, resuming net asset purchases and decreasing policy rates’. There seemed to be particular concern about the inflation outlook. In particular, although inflation was projected to rise in coming years it ‘was still projected to reach only 1.6% in 2021, which was seen to remain some distance away from the Governing Council’s inflation aim’. Against this background it was important to prepare for ‘adverse contingencies’.”
“At the July meeting we think the Governing Council will decide to change its forward guidance on policy rates to explicitly hint at the possibility of rate cuts. In particular, it could say it expects the key ECB interest rates ‘to remain at their present levels or lower …’.”
“In September, we expect a 10bp cut in policy rates as well as a clear signal that the ECB is investigating the design of a new asset purchase programme. By December, we expect the ECB to announce a EUR 630bn QE package, to be implemented for 9 months from January 2020 at a pace of EUR 70bn per month. The second 10bp rate reduction will follow in Q1 of next year.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.