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MNI (London)
--Debate Expected This Week Over APP End Announcement; June Skip Seen
     LONDON (MNI) - Consensus is growing that the European Central Bank (ECB)
will bring its asset purchase programme (APP) to an end in December this year -
barring any shocks in the interim - with July the likelier date for a formal
announcement than this week's Governing Council focussing on a robust debate on
the pace of normalisation. 
     Although debate continues as to when the ECB's Governing Council will
actually announce the end of the Asset Purchase Programme, it seems that a
consensus has emerged that, barring any crises in coming months, it will end in
December this year.
     There have been vocal calls in recent weeks for a formal announcement of
the APP's end date following this week's council meeting, to be held in Riga,
Latvia. In late May, Executive Board member Sabine Lautenschlaeger said June
would be an opportune time to make the announcement.
     While making no direct comment on the timing of the announcement ECB Chief
Economist Peter Praet told a gathering in Berlin last week that inflation is
slowly but surely converging towards the Governing Council's criteria that will
determine ending the APP. 
     On the other side of the ledger there are plenty of voices that say no
announcement should be made until at least July, with some telling MNI that the
discussion on ending APP should not even begin before then.
     One Eurosystem source told MNI that the communication strategy is likely to
remain close to the current one (MNI SOURCES: ECB June MonPol Meet Set To Play
For More Time, June 1). 
     --Q4 TAPER
     While none of the sources MNI spoke to in late May would commit to how or
when the APP would finally end, the view of one, suggesting an APP termination
by year end, with a gradual taper from September, did not seem to be an
unreasonable reading of the situation.
     However, it could also be that purchases continue at the current rate of
E30 billion until December before ending -- with little existential difference
seen by Council members on either side of the debate.
     Although May's headline inflation touched levels in line with the ECB's
target, there is still plenty on the near horizon to justify caution -- at least
for a few more weeks.
     The Eurozone economy has undoubtedly slowed since the start of the year,
albeit from robust levels, and there are fears amongst council members that any
exacerbation of the trade dispute with the U.S. will weigh further on growth.
     Localised political risks also add to concerns over the outlook, not least
in Italy. Although recent comments from new Italian finance minister Giovanni
Tria over the euro and fiscal responsibility have eased fears a little, there
are still worries that Rome's populist government could be a thorn in the side
over coming months.
     Brexit, slowly coming to a head and now less than 10 months away, is also a
potential speedbump to growth, with disruption to UK/r27 trade likely to impact
GDP growth on both sides of the channel.
     According to some sources, one of the reasons the ECB is hesitant to
announce a firm date for the ending of the APP is the immediate focus it will
bring on to the subject of when the first hike in rates will come.
     Forward guidance from the ECB, communicated regularly by President Mario
Draghi and others, is that key rates will "remain at their present levels for an
extended period of time, and well past the horizon of the net asset purchases."
     Under current conditions, that has been interpreted as being 6 to 9 months
after the end of APP -- bringing the summer to early autumn of 2019 into focus.
     That is certainly not seen as unrealistic by ECB insiders and Bundesbank
President Jens Weidmann told a Mannheim audience in March that it is not
unfeasible to expect a first rate hike in mid-2019.
--MNI London Bureau; tel: +44 203-586-2225; email:
--MNI London Bureau; tel: +44 203-586-2223; email:
[TOPICS: M$X$$$,MX$$$$,M$$EC$]
MNI London Bureau | +44 203-865-3812 |
MNI London Bureau | +44 203-865-3812 |
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