That fiscal policy is becoming the new monetary policy when it comes to fighting recession was a key conclusion of PIMCO’s Secular Forum, and this was the message ECB President Mario Draghi underlined through both actions and words.

Come the fall, the ECB will likely deliver yet another easing package that could effectively deplete its monetary policy toolbox.

We think Thursday’s downgraded growth assessment is a precursor to two changes in the ECB’s monetary policy stance later this year.

Will the ECB have sufficient firepower – and support from the population – to spur the economy when the next recession arrives?

In Europe, the secular risks appear to be materializing more quickly than expected, particularly in Italy.

Europe’s unconventional monetary policies and low levels of interest rates are likely to persist.

The ECB’s exit from QE will continue to be a major factor influencing markets, particularly if it happens faster than anticipated.

Our central expectation for the European Central Bank (ECB) meeting on 26 October is for the Governing Council to extend asset purchases by nine months at €30 billion per month to September 2018, without yet committing to a specific end date, while strengthening its commitment to keep policy rates and the balance sheet unchanged when asset purchases end next year.

Despite the AfD’s gains, Germany’s election shouldn’t prove disruptive for financial markets.

We see bullish and bearish risks to Europe’s outlook as roughly balanced in the near term, but increasing and tilting to the downside toward the end of our secular horizon.

We do not interpret Draghi’s speech as a hawkish change in policy.

Although we expect no change at Thursday’s meeting, the coincidence of robust economic growth and a technical limit on government bond holdings should force the ECB to taper QE early next year.

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.