ECB: Preserving the very substantial amount of monetary support was necessary - Rabobank

Research Team at Rabobank, notes that the accounts of the September ECB meeting confirmed that “preserving the very substantial amount of monetary support embedded in the staff projections was necessary to secure a return of inflation rates to [its target]”.

Key Quotes

“However, we are observing a gradual shift of focus towards the potential side-effects of current policies, and increasing calls that an exit strategy must be formulated. An anonymous ECB remark about tapering –although subsequently denied– has also sparked such market expectations.

Based on recent developments in both the ECB’s communications and the outlook, we believe that while the time may not be ripe for immediate tapering, the GC will start preparing markets for an exit. Therefore we no longer expect a depo rate cut in December. Instead we expect a comprehensive strategy to be announced, including a 6m extension, a pre-announcement of data-dependent tapering, and forward guidance.”