ECB unlikely to change its forward guidance on rates or QE - Rabobank

In view of the analysts at Rabobank, ECB is unlikely to change its forward guidance on rates or QE in the near-term as various uncertainties remain.

Key Quotes

“Although the ECB has made it clear that they will look through the increase in headline inflation, some GC members –admittedly mostly the known hawks– remain vocal opponents of the current monetary policy stance.”

“With Draghi basically pre-committing to QE throughout 2017 last December, it seems that some hawks have chosen a different attack vector: calling for changes in the ECB’s forward guidance instead. This would involve dropping the ‘or lower’ from the wellknown adage that “[rates] remain at present or lower levels for an extended period of time”, to signal that the ECB’s policy outlook is slowly moving away from the dovish end of the spectrum.”

“We do not believe that the ECB will change its forward guidance on rates or QE in the near-term as various uncertainties remain. However we do think that the GC will slowly start sounding more hawkish as the year progresses in order to prepare markets for an eventual exit, provided that key risk events –e.g. the various elections in Europe, renewed uncertainty surrounding Greece, but also foreign risks such as Trump’s policy initiatives– do not throw a spanner in the works.”