Analysts at Rabobank suggest that as the recent rise in oil prices will also add to global inflationary pressures, the ECB may still draw some comfort from a little bit of cost-push inflation, however, as it looks ready to make an end to the asset purchase programme.
“But with core inflation at just 0.7% in April –partly due to strong transitory factors– we continue to favour a cautious ECB on rates, both in terms of the timing and the pace of the hiking cycle. More specifically, we don’t anticipate a first rate hike until September 2019, and we expect the cycle to consist of minimal steps of only 10bp to bring the deposit rate to 0% by March 2020. With excess liquidity to remain ample over the short- to medium term, we expect money market rates to remain anchored to the deposit rate for the foreseeable future.”
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