There is a strong case for the ECB to continue tapering its QE programme, to alter its forward guidance and to begin normalising policy rates.
PIMCO interprets the ECB’s decision to lower the asset purchase rate as acknowledgement that 2% is an ambitious inflation target to achieve.
The ECB must decide on the minimum amount of quantitative easing (QE) needed to return inflation to target – and in what size doses it should be administered.
The ECB is likely to wait until December to announce a further package of easing measures.
Germany and Switzerland have many differences despite their proximity to each other. Now they have one difference less.
The European Central Bank’s balance sheet has ballooned by about 50% over the last 18 months, but inflation has been trending lower.
At Thursday’s meeting, the European Central Bank (ECB) ticked all the boxes that PIMCO was expecting and more: liquidity via targeted longer-term refinancing operations (TLTRO), rate cuts and asset purchases.
We expect the ECB to deliver a little bit of everything at this week’s policy meeting.
Ultimately the eurozone needs easier, not tighter, monetary conditions to return the economy to equilibrium. Today’s market reaction makes the path to economic recovery more challenging.
Our baseline expectation for the ECB’s Governing Council meeting on 3 December is that it will endeavor to shock inflation expectations upward by credibly promising to behave irresponsibly.