ECB: Most of the key decisions and details to be announced at the October meeting – Goldman Sachs

Following the latest ECB announcements, analysts at Goldman Sachs had left their policy forecast unchanged after Mr. Draghi gave fewer hints on the Governing Council’s considerations regarding tapering than they had expected.  

Key Quotes

“He indicated that the bulk of the decisions on the APP are likely to come at the October Governing Council meeting (while some details may only come in December). Mr. Draghi did note, however, that the Governing Council would decide when ready and that, for example, work in various committees could affect the timing of the announcement of changes to the APP.  On balance, this suggests that most of the key decisions and details are to be announced at the October meeting.”

“We continue to expect the ECB to announce a 12-month gradual tapering (i.e., tapering by EUR5bn per month during 2018). We expect this tapering process to be data independent once announced. We continue to expect the ECB to maintain its dovish bias, noting it has the option to increase the APP in an adverse scenario (in practice we would expect the threshold to be high). We do not expect a rate hike until 2019 (our modal forecast is for a hike in late 2019, but we see risks skewed towards an earlier hike, implying that our median estimate of a hike is around mid-2019).”

“Latest press conference strengthens our view that the ECB will adhere to its expected sequencing and not hike rates until “well past” the end of net asset purchases. We expect that the ECB will use forward guidance to squeeze out market pricing of rates hikes in late 2018 / early 2019, should this need arise.”