The ECB is expected to roll out QE2 - in the form of an extension beyond September 2016 - by the end of this year.
The Fed's non-decision and the data flow, at a global level and now increasingly at the Euro area specifically, favor a quick response by the Governing Council. This made us think that, although a close call, an announcement would be made on 22 October.
Until Monday, ECB rhetoric, skewed more toward "wait and see". However, it seems to be spreading beyond the ranks of those who were already even against the principle of QE in January. Benoît Coeuré stating that while the ECB had to be "ready", a "discussion" on more QE would be "premature." There is a signal of no sufficient consensus within the Council for a decision to be made this month.
Although the impending Council meeting remains "live,", it is believed that December is now a likelier occasion for a QE2 announcement, argues Bank of America Merrill Lynch. Formation of a consensus could well require further signs of transmission of low EM demand to European exports, as well as more signals of a relapse in observed and expected inflation.
