Draghi keeps suspense, ECB to extend QE program in December - ING

Carsten Brzeski, Chief Economist at ING, points out from today’s meeting that the European Central Bank is not ready yet to extend the QE program. They expect the ECB to extend the program in December. 

Key Quotes: 

“The macro-economic situation has not changed since the September meeting. If anything, the data released since then has rather confirmed the ECB staff’s projections of a gradual, but weak recovery and not so much of the short-term worries the ECB’s Governing Council seemed to have had in September on the back of a couple of disappointing data releases.”
 
“Draghi’s comment that the December meeting will determine monetary policy for the following weeks and months sounded promising and should increase expectations.  But isn’t determining monetary policy for the next weeks and months what every single ECB meeting does? What Draghi actually did say was that QE was not forever but that an abrupt ending to bond purchases was unlikely.” 
 
“In sum, what are the take-aways from today’s meeting? In our view, the ECB is not yet ready to extend QE. The recovery of the Eurozone economy is not weak enough to justify more stimulus but also not strong enough to light-heartedly talk about tapering. This is why the ECB is simply buying time.”

“Mario Draghi’s elegant balancing between tapering and an extension of QE keeps all expectations alive and could have one welcome fall-out: slightly higher long-term rates which will bring some relief to the scarcity problem without panic. At the December meeting, our view is that the ECB will announce an extension of QE until the end of 2017, possibly at a slower pace than the current 80bn euro.”