ECB: Ready to use existing measures to limit contagion – Danske Bank

Pernille Bomholdt Henneberg, Senior Analyst at Danske Bank, suggests that in the near term, the ECB is set to use the flexibility within the QE programme.

Key Quotes

“Potentially it could front-load purchases. The ECB could also purchase longer-dated bonds or buy more periphery bonds without announcing changes.

Over the coming one-three months, we look for a step-up in the monthly QE purchases to EUR100bn. This should be in response to an unwarranted monetary tightening due to the negative market sentiment, which together with the weaker growth outlook threatens the medium-term outlook for inflation.

We do not expect rate cuts as a tool to limit contagion and the ECB also seems less focused on a weaker euro.”