ECB: Taming the hawks - ING

Analysts at ING suggest that ECB watchers this year might feel as though they've stepped onto the set of a movie combining the scripts of “Groundhog Day” and “Aladdin” as every time the ECB thinks it has bought some time, either macro developments or statements by ECB members undermine its plans and let the genie of policy changes out of the bottle.

Key Quotes

“While the ECB had actually tried to hush any exit speculation with the October decision of “lower for longer”, strong macro data, a general fear in financial markets that inflation could return faster than anticipated and remarks by ECB officials have recently fuelled new speculation about the future of QE.”

“We don’t expect any changes at January's ECB meeting but bank president Mario Draghi will have to address the latest speculation that QE could stop in September. We will be watching closely to see whether Draghi confirms what he said in October, that “it's never been our view that things should stop suddenly”. We would expect him to do so, as this would be the only way – at least temporarily - to get the genie back in the bottle.”

“We stick to our previous view that the ECB will not stop QE in September but will rather decide on another “lower for longer” strategy beyond September, probably until the end of the year. Interestingly, the ECB is increasingly focusing on growth and seems to regard inflation only as a derivative of growth developments.”