At today’s meeting, the European Central Bank kept rates unchanged and confirmed the end of the purchase program. According to analysts from Rabobank, the ECB sounded slightly more dovish than October.
Key Quotes:
“ Growth projections for 2018 and 2019 were downgraded slightly. The Council still sees risks as broadly balanced, but crucially, Draghi added that that they “are moving to the downside”.
“Without sounding overly dovish, Draghi has thus given the ECB the option to change its risk assessment and forward guidance if the data doesn’t improve early-2019.”
“If the data doesn’t deteriorate further, we believe that the ECB will be able to stick to its current plan; that is, we still expect the first rate increase in September 2019. “
“As we have noted previously, we would expect a more formal announcement regarding a successor to the TLTROs during the March 2019 meeting
“The ECB has extended the time it has to reinvest principal payments. These will now be spread across the year. That decision should help smooth out ECB activity in the various bond markets, and may help limit price distortions during months in which big redemption flows are due. Finally the ECB has re-affirmed that it may still purchase sovereign bonds with a yield below the deposit facility rate, to the extent necessary.”
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