Research Briefing

There are several dovish caveats to ECB’s faster QE tapering

Despite the economic headwinds and much increased uncertainty stemming from the Russian invasion of Ukraine the ECB decided to accelerate its QE exit and keep the door wide open to an interest rate hike later this year. This was a more hawkish outcome than we had expected, but we remain of the view that the council won’t actually hike this year.

What you will learn:

  • Today’s decision leaves plenty of optionality to respond to a worsening of the ECB’s economic outlook, which we think is likely.
  • The ECB’s unusual release of two adverse scenarios seems to suggest ECB staff shares our view.
  • Against the backdrop of another large upward revision to its inflation forecast and upside risks to the price outlook the ECB council agreed to end the PEPP as planned in March and to taper asset purchases under the APP from €40bn per month in April to €20bn by June rather than the earlier signalled October.
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