ECB has begun horse trading on its forward guidance - Rabobank

According to the analysts at Rabobank, recent comments from both the hawks and doves on the Council suggest that the ECB has begun horse trading on its forward guidance.

Key Quotes

“Nowotny surprised markets last week, when he suggested to Handelsblatt that the deposit rate could be hiked before the asset purchase programme has concluded. This directly opposes the current forward guidance that rates “remain at present or lower levels for an extended period of time, and well past the horizon of our net asset purchases.”

“We would argue that it makes little sense for the GC to hike before the end of asset purchases: it is akin to hitting the breaks while your other foot is still on the accelerator.”

“Although such a move doesn’t seem like the most plausible course of action, Nowotny’s comment could be part of a discussion in the Council on the future of forward guidance. In a Bloomberg TV interview, Visco suggested that the period between the end of the purchase programme and the first rate hike could be shortened (from the current phrase of “well past the horizon of our net asset purchases”, emphasis ours).”