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MNI (London)
--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
     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:
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MNI London Bureau | +44 203-865-3812 |