Tentative times as ECB holds rates

The European Central Bank (ECB) has held interest rates in line with market expectations.

Tentative times as ECB holds rates

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This dpes not mean the eurozone is on track for further easing, said Diebel, but it does mean that “the withdrawal of existing support is likely to be tentative at best” and likely to “occur at a very slow pace”.

Hetal Mehta, senior economist at Legal & General Investment Management agreed fundamentals, such as wage growth and core inflation, had not picked up enough to warrant tighter policy from the ECB.

Mehta expects the central bank will be “Draghi-ing out” its bond-buying programme.

“We do expect the ECB to announce later this year that it will gradually reduce the pace of asset purchases through the course of 2018.

“But the tapering is as much about ending the additional stimulus – the economy is growing at a healthy pace of around 2% annualised, sentiment data such as the PMIs and IFO look solid and the labour market has been improving steadily since 2013 – as it is about scarcity of bonds.”

He added: “Overall, we think the ECB will acknowledge better growth and use that to announce tapering by the end of the year. But rate hikes are not coming anytime soon.”

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