ECB measures take account for prolonged uncertainty but recovery still seen intact

Domestic growth story still intact amid prolonged uncertainty: Against the backdrop of a surprisingly strong Q1growth the ECB saw no need to materially change its 2019 growth expectation. More fundamentally, the domestic growth story is still seen intact but the growth outlook for the coming years was slightly reduced.


  • The Governing Council’s major concern is about prolonged uncertainty but the base case of continuing growth is still seen intact while measures to protect the euro area economy are needed.
  • Within the Governing Council (GC) some members even opted for easing measures. In the end they unanimously agreed on the following:
          o To leave key rates constant “at least through the first half of 2020” thereby extending its forward guidance by six months.
          o In the forthcoming TLTROs the rate applied can at best be 10 bps above the average deposit rate prevailing over the life of the operation. This was less generous than anticipated by market participants.
  • The ECB has moved into a wait-and-see stance with heightened attention to downside risks. It has postponed policy normalization further and we now do not expect any rate hike until the end of next year at least.

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WEBINAR REPLAY - Credit market: the bridge over troubled water?
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Market Compass May 2020
Edited by the Macro & Market Research Team. The team of 13 analysts based in Paris, Cologne, Trieste, Milan and Prague runs qualitative and quantitative analysis on macroeconomic and financial issues.
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