ECB: Tapering not on the agenda for a good while yet - Commerzbank

In the last few days, markets have begun to speculate more about whether an end to the ECB’s asset purchase programme could be approaching. This was triggered by a report from a news agency, although on closer look this did not contain anything new, said Dr Michael Schubert, analyst at Commerzbank. “We still believe the ECB is likely to extend its buying programme beyond March 2017, given the disappointing inflation trend, and the latest market reaction should have strengthened its intentions.”

Key Quotes

“In its report, Bloomberg cited ECB representatives, without mentioning names, according to which consensus has now been reached in the central bank that the ECB will likely gradually reduce its asset purchases as soon as it believes an end to the programme is appropriate. The report did not give any indication of the time horizon of the tapering. And the sources notably did not rule out the possibility either that purchases would be extended beyond March 2017 at a monthly rate of the current 80 billion euros. Consequently, on reflection, the report reaches the unspectacular conclusion that the ECB – as expected by most economists – wants to proceed gradually in the case of an exit and does not want to end its programme abruptly.”

“That said, the ECB has clearly defined the conditions under which the purchases will end: The purchases “of €80 billion are intended to run ... in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with the inflation aim“. As we still believe that core inflation will stick at its current level, against the expectations of the ECB, we also still anticipate that the ECB will extend the purchases of €80 billion beyond March 2017 and tapering will therefore not happen for a long time yet.”