ECB: Will the meeting deliver the expected changes? – RBC CM

Research Team at RBC Capital Markets, suggests that the ECB has argued that the QE programme will remain in place until inflation (expectations) have reached levels closer to the central bank’s target – which is clearly not the case at present.

Key Quotes

“The market (including ourselves) has, in turn, been arguing for a while now that the ECB will have to make changes in order to be able to keep up the QE programme. The questions are: when will those changes take place and which precise form will they take? I

In a completely unchanged environment (light clue bars), we see the ECB as running into their own, self-imposed 33% limits around 4-5 months after March 2017. We stress, however, that we reckon that this is an upper end estimate and the reality is, that the constraints will probably bite earlier.

In summary: We think the ECB will want to continue conducting their QE programme and a six months extension is a plausible expectation. However, this does not appear feasible without considering changes to the parameters of the QE programme itself.”