ECB: QE path not defined yet but slower purchases are coming - Danske Bank

Analysts from Danske Bank, maintain their view that the European Central Bank will continue its QE purchases but at a reduced pace of €40bn per month in the first half of 2018. Now they believe this will be announced at the October meeting. 

Key Quotes: 

“The ECB kept unchanged policy rates, its QE programme, its forward guidance and QE easing bias. Hence, the ECB is still signalling its readiness to increase the size and/or duration of the QE purchases. The unchanged QE easing bias was perceived as dovish, as 47% of economists in a Bloomberg survey had expected the ECB to remove the reference to its readiness to increasing the size of the QE programme.”

“According to President Mario Draghi, the Governing Council was unanimous in setting no precise date for when to discuss changes to the QE programme but argued ‘our discussion should take place in the autumn’. Additionally, Draghi said the ECB has not tasked its staff to look into QE options after December 2017. This suggeststhe ECB is not ready to make an announcement at the September meeting on how QE purchases will continue next year. We maintain our view that the ECB will continue its QE purchases but at a reduced pace of EUR40bn per month in H1 18 and now believe this will be announced at the October meeting (previously September).”

“It will be very interesting to see whether Draghi’s main focus will be on his belief in the Phillips curve (i.e. the economic recovery will eventually lift wage inflation) at Jackson Hole when he is together with other global central bank governors. Given today’s communication, this seems less likely, as he argued the ECB is waiting for more information (including the updated projections in September) but this could change ahead of Jackson Hole.”