The European Central Bank meet on Thursday September 13, this via UBS on what to expect
In brief:
In the absence of big surprises, the ECB can maintain a steady hand and proceed in line with its monetary policy guidance from June and July, namely: phase out QE by the end of 2018, and then decide - in a data dependent fashion - on the timing and size of its first deposit rate hike during the summer or autumn of 2019.
The focus … will be on the ECB's new staff macro projections for 2018-2020, which will also give the bank an opportunity to evaluate the data received over the summer.
- We expect the ECB to leave broadly unchanged its forecast for growth (2.1% for this year, 1.9% for 2019) and inflation (1.7% for 2018-2020).
We would also expect Mr Draghi to be asked about the situation in Italy, i.e. the upcoming budget and recent press reports claiming that the government might ask the ECB for ongoing support through asset purchases.
ECB call unchanged:
- Following the termination of QE by end-2018, we expect the ECB to start hiking the deposit rate (-0.4%) from September 2019, initially in small steps of 10bps, to bring the rate back to zero by early 2020.
- We think the ECB will reinvest maturing securities of its QE portfolio in full for two to three years after the end of QE, and then gradually reduce reinvestments in a data-dependent fashion.
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Earlier previews:
