ECB: Do not expect a near-term change in the stance of policy - Westpac

Analyst at Westpac notes that the December meeting minutes heightened expectations of a coming shift in the Council's forward guidance.

Key Quotes

“Therein, the Council highlighted that growth in the region was "increasingly self-sustaining" and that the output gap was expected to close soon. The consequence for inflation is an erosion of remaining downside risks and greater belief that it will reach their 2.0%yr target in the 'medium term'.”

“We and the market do not expect a near-term change in the stance of policy. Instead, the debate is over whether the asset purchase program can end at September, or will need to be run down over the remainder of the year. From there, the key question is how far into 2019 it will be before a rate hike is delivered. A definitive view wont be available for months, but that wont stop the market from extrapolating any change in tone in the interim – however minor.”