December 7, 2018

Outlook to keep ECB on a dovish normalization path

Share on facebook
Share on twitter
Share on linkedin
Share on email

In Short

Weaker data are set to trigger a downward adjustment in the ECB’s macro outlook at the Dec 13 meeting. Yet comments from ECB officials suggest that the growth narrative is still viewed as fundamentally intact. At the press conference a dovish tone is set to prevail emphasizing the contingency of the policy path.
Outlook to keep ECB on a dovish normalization path
Share on facebook
Share on twitter
Share on linkedin
Share on email

Highlights:

  • Weaker data are set to trigger a downward adjustment in the ECB’s macro outlook at the Dec 13 meeting. Yet comments from ECB officials suggest that the growth narrative is still viewed as fundamentally intact. At the press conference a dovish tone is set to prevail emphasizing the contingency of the policy path.
  • We see the ECB ending QE in December and leaving rates constant at least throughout summer 2019. However, given the latest data and higher risks, we now look for a first deposit rate hike only in December 2019.
  • We look for the announcement of an APP reinvestment period of three years to keep the term premium down but a tilt towards longer dated bonds (“operation twist”) will be hard to engineer. When outlining the details of its reinvestment policy, the ECB may hint at some flexibility in shifting from government to corporate bonds.
  • We do not expect a new TLTRO announcement as it would water down the normalization. But the ECB will not close the door; the mid-2019 cliff effect will need to be addressed if financial conditions or the economy deteriorate further.

Read the full publication below.

OUTLOOK TO KEEP ECB ON A DOVISH NORMALIZATION PATH

Also interesting

brainstorming-concepts
June 23, 2021
Press Releases

Aperture Investors and Sycomore AM Funds now available through Volksbank

Picture1
00:07:08
June 22, 2021
Podcast

The Spotlight ǀ Powering progress: Luca Fasan presents the new Sycomore Global Education Fund

Picture1
June 22, 2021
Active Equity

Powering progress: the Sycomore Global Education Fund