ECB: Market expectations for rate hike have been pushed back – Standard Chartered

Analysts at Standard Chartered note that comments from GC members in March that the deposit rate could be hiked before the end of the QE programme prompted the market to price in a deposit rate hike in mid-2018.

Key Quotes

“Recent GC comments pushed against these expectations and now the first hike (10bps) is priced in for Q1-2019, which is also our view.”

“We expect the ECB to start hinting in June through the press statement and speeches that tapering may be warranted if the macroeconomic environment remains benign. In the September meeting, Draghi may formally announce that the ECB’s staff has been tasked with designing the appropriate QE exit strategy and in the December meeting to announce that QE will be tapered from January. We see EUR 10bn of tapering per meeting in 2018 so that net purchases reach zero in September 2018. We expect the deposit rate to be hiked first in Q1-2019 before any hikes to the refi rate.”