Janus Henderson: ECB — Draghi resists a hawkish stance

As expected, the European Central Bank (ECB) kept rates unchanged and stated its intention to keep quantitative easing running till the end of September 2018 or beyond.

Thus, the benchmark main refinancing rate remains at zero and the deposit rate at a negative 0.4%. Net asset purchases under the extended asset purchase programme will remain at a monthly pace of €30m for the duration. The central bank maintained that rates will not rise until well past the end of net purchases, which makes Q2 2019 the likely point at which rates are likely to rise. 

It was noted that the recent volatility in the euro created uncertainty and needed monitoring, though the bank did not sound as concerned about its level. Risks to the growth outlook were viewed as balanced. The economic cycle is now well entrenched, though inflationary pressures continue to remain weak. 

Nonetheless, we expect the ECB to continue on its slow but steady withdrawal of stimulus, absent any shocks. The market reaction has been in line with our expectations ahead of the meeting, with the euro strengthening further and shorter dated government bonds selling off, while longer dated ones remain well supported.