Euro area: Monetary policy on hold with an easing bias

Barclays notes:

Since the ECB launched its asset purchase programme in March, the Governing Council has remained cautiously optimistic about its potential effect. Our financial conditions index suggests that despite a slight tightening since April due to the bond market selloff and a renewed euro appreciation, financial conditions remain very accommodative from a historical standpoint and should continue to support economic activity.

The ECB should continue its monthly asset purchases at the same pace until September 2016, and probably even longer, given we believe the increase in inflation will likely be slower than the ECB currently projects. Moreover, we believe there is a non-negligible chance that additional QE measures could be announced by the end of this year depending on financial market developments, especially in conjunction with upcoming discussions about the third Greek bailout.