ECB: Slowly reducing the accelerator – Nomura

Analysts at Nomura note that the ECB did not, repeated the same guidance (on rates and asset purchases) issued at the previous policy meeting in July – in other words, rates on hold “at least through the summer of 2019” and reinvestment of principal payments to continue for an “extended period” after the end of net purchases.

Key Quotes

“Unsurprisingly, in light of this guidance, policy was left on hold and interest rates are not expected to be adjusted upwards for another year – and even then only modestly (just 15bp by end-2019 according to market and consensus expectations).”

“In the same Bloomberg survey as mentioned above around three-quarters of respondents expected an adjustment to the ECB’s forward guidance sometime between March and July next year (with June being the most popular month), most likely to provide some nuance about the timing of future interest rate hikes as the date for delivering such a policy move becomes closer.”

“The only subtle change in language in the ECB’s policy statement was that the reduction in net asset purchases to €15bn from next month is now definite – i.e., “the Governing Council WILL (emphasis added) reduce the monthly pace of the net asset purchases to €15bn until the end of December 2018”, while the decision to stop net purchases altogether from the start of next year remains an ANTICIPATION (and subject to incoming data), as was the case in July.”