The ECB expects President Draghi’s Jackson Hole speech to concentrate on the theme of the symposium, stimulating a dynamic global economy as compared to the monetary policy which was the focus of his quantitative easing speech three years ago, noted Barclays in a research report. The European Central Bank stated that this discussion would happen in the autumn. This is consistent with the view that faced with strong growth momentum, but low CPI inflation, the Governing Council would likely announce the next steps for QE in September, but more likely during the October meeting, stated Barclays.
However, given Germany’s export dependence, any comments on recent outturns in the global economy and the wider euro area might be seen as a shift towards a more dovish or hawkish policy rate.
“We expect an extension of QE into 2018 but also a reduction of its monthly pace to €35-40bn in H1 18 (which we expect to be announced in September/October) and further reduced to €15- 20bn in H2 18. In 2018, we also expect two 10bp hikes in the deposit rate, in Q2 18 and Q4 18”, added Barclays.
Both QE and negative deposit rates are expected to be in place throughout 2018 to underpin the gradual rebound in inflation, although at less accommodative levels than in 2017given inflation is also expected to be closer to target.
At 18:00 GMT the FxWirePro's Hourly Strength Index of Euro was neutral at -22.6061, while the FxWirePro's Hourly Strength Index of US Dollar was slightly bearish at -69.4574. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex
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