MNI INSIGHT: ECB Rate Hike Timing Not Seen As Issue For Now

--ECB Rate Hikes To Be Defined As APP Finishes 

--Many Hike Timing Options On Table, Wording On Hikes Intentionally Vague 

     LONDON (MNI) - Any decision by the European Central Bank's Governing

Council to hike rates will be discussed and taken only once the asset purchase

program ends, with no talks yet, let alone decisions taken, as to timing or

depth of the first hike, MNI understands.

     Although there are clearly some members of the Governing Council who

believe the first hike could come as soon as 6 months after the ECB's asset

purchase programme comes to an end -- Bundesbank President Jens Weidmann backed

such a view view in late March -- MNI understands the debate has not yet begun

and will not be discussed in material terms until the APP draws to a close

     Weidmann's view is seen by some in the Eurosystem as just one of the many

plausible scenarios, leaving open the option that the first hike in rates could

come more than 6 months after the end of QE.

     At least one official noted that the GC's decision not to put a fixed time

on when rate hikes would start was a consensual "strategic choice" that the

wording must be made intentionally vague.

     With the timing of the initial move yet to be discussed in earnest, there

has certainly been no debate as to the depth of the first move either, MNI

understands. 

     Although no-one directly addressed the recent comments attributed to

Austria's national bank governor Ewald Nowotny suggesting the first move in

interest rates could be a 20 bps hike in the deposit rate, MNI believes the

ECB's communication on rates is expected to become clearer only at some future

point as gradual steps towards normalisation are unveiled.

     The point is being made within the Eurosystem that the end of the APP would

not mean an automatic increase in rates, with the timing of any hike dependant

on the macro-economic conditions across the Eurozone and possibly should only

come after an appropriate buffer period in order to fully analyse the initial

impact of monetary policy normalization.

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

[TOPICS: M$E$$$,M$X$$$,MX$$$$,M$$EC$]