ECB: Slowing of asset purchases already begun – Rabobank

As we have entered the New Year, the ECB has again resumed its asset purchases, with the slower pace of EUR 30bn/month now being active, points out the research team at Rabobank.

Key Quotes

“The purchase statistics released yesterday highlight that some slowing has effectively occurred in December already – due to the usual holiday lull and the ECB being out of the market in the last week of the year. According to the ECB, it purchased about EUR 50bn in the last month of the year.”

“Perhaps more notably, through the turn of the year, a number of ECB members have become more vocal about their expectations for 2018 and two members have recently outright stated that they do not expect another extension of the asset purchase programme to be necessary. This weekend, Chinese news agency Caixin published an interview with Mr. Coeuré, who stated that he believes “there is a reasonable chance that the extension of our asset purchase programme decided in October can be the last”. Yesterday, Mr. Nowotny supported Coeuré’s view, stating that the end of asset purchases is “within sight”, at which point only reinvestment purchases will be made. Nowotny further added he expects it will take “a couple of years” before the ECB also limits reinvestments causing the central bank’s balance sheet to shrink.”

“Whilst these comments aren’t entirely new –with for instance Mr. Mersch signalling earlier he wants to gradually end the asset purchases too– these comments seem to have sparked some new support for the euro in recent days. Although the market never believed QE to last indefinitely, these remarks may be steering the expectations somewhat more towards a clean exit in October, as opposed to market expectations that there will be yet another step in the tapering process.”