Reports doing the rounds from a Bloomberg article that came out yesterday
This looks to have slipped under the radar while all the Catalan guff was going on yesterday.
Bloomers had a “sources” story out yesterday afternoon (updated today) claiming that there’s an agreement in place among the ECB’s governing council to keep in place a pledge not to raise rates until well past the end of QE.
The sources say that this promise needs strengthening guidance;
as financial markets may question whether there will be a long-enough pause between the end of purchases and the first rate hike.
We know the ECB are a long way from hiking, considering we’re still haven’t had the full details of the next taper but this news emphasises that the ECB will remain very dovish in their delivery of forward guidance regarding tightening at upcoming meetings.
Bloomberg also note that the ECB could sweeten any taper by making clear that they will reinvest purchases already made.
My view remains that we get another 20bn taper and an extension out for another year. The market is looking at 6-9 months for an extension. A highly dovish ECB taper could be temporarily bearish for the euro.