Morgan Stanley with an early ECB preview for the meeting next Thursday (Septmeber 13)
This in summary, bolding mine
A gradual exit:
- We think that the ECB is in the process of engineering a very slow policy shift. This is because, while underlying price pressures are building, this is happening quite gradually and so an ample degree of monetary accommodation is still required. We doubt that the central bank is in any hurry to modify its monetary policy stance. Rather, it'll probably keep its options open and stress that a less favourable outlook would warrant a reassessment of whether the stimulus provided is appropriate. At this stage, we sense that the bar for this to happen in the near term is fairly high.
Reinvesting for long, hiking late next year:
- The monthly asset purchases will be cut in half in 4Q, to €15 billion, and then discontinued after year-end. At that point, the monetary stimulus will be provided by the two remaining policy tools: the balance sheet and forward guidance on rates. We expect that reinvestment of the sizeable stock of assets purchased will continue for quite a long time, probably way past our forecast horizon, perhaps also via some kind of 'operation twist' to compress long-term interest rates. The first and only depo rate hike we forecast for 2019 is in October, by 15bp to -0.25%.
Macro outlook
- Still solid but with risks: While the staff projections should confirm that the expansion remains broad-based and momentum is now stabilising, the pace of GDP growth has slowed - also owing to more binding capacity constraints in core Europe - and is now just a little above its trend rate. Trade protectionism is likely to continue to be described as a prominent risk. Albeit marginally, weaker oil assumptions and a slight currency appreciation should imply a downward revision to the inflation path.
