Things to heat up for the ECB - Rabobank

Elwin de Groot, Research Analyst at Rabobank, suggests that the refusal of core inflation to rise is a key reason for the ECB to maintain a dovish stance.

 Key Quotes

“However, given the streak of monetary expansion measures since December last year, we feel there is no strong reason yet for the Governing Council to drastically change course in September (although ECB staff projections for 2017 GDP growth are likely to be revised down).

But things may heat up pretty soon after that. The currently communicated ‘earliest end date’ of the asset purchases programme has been set at March 2017. Given that it is quite unlikely that the ECB’s goal of ‘sustainable inflation’ will be met come March 2017, internal discussions on the future of the asset purchase programme are likely to begin soon. But answering the “how” and “to what extent” is probably not up for September.”