Societe Generale Predicts ECB Will Launch Open-Ended QE Next Month
Societe Generale Predicts ECB Will Launch Open-Ended QE Next Month
(Bloomberg) --
The European Central Bank will launch an “open-ended” quantitative easing program of asset purchases next month as part of a broader package designed to lift the euro-area’s flagging economy and stimulate inflation, according to a prediction by Societe Generale.
Following its Sept. 12 policy meeting, the ECB will announce monthly asset purchases worth 40 billion euros ($44 billion), cut its deposit rate by 20 basis points and unveil a “generous” tiering system to dissuade banks from passing negative rates on to retail clients, Societe Generale economist Anatoli Annenkov said in a note.
Quantitative easing is unlikely to end before March 2021 as the U.S. will slip into recession next year, the French bank forecast.
“With market expectations high, no turnaround in the data flow and with material risk ahead, the ECB has little option than to take decisive action,” Annenkov wrote. “Front-loaded policy action is usually preferable but this time it will be difficult to beat expectations.”
A recent spate of gloomy economic news, including a looming recession in Germany and rising trade tensions, has fueled investor expectations that the ECB will roll out a big stimulus package. Finnish central banker Olli Rehn, a member of the ECB’s Governing Council, said this month policy makers should come up with measures that overshoot market expectations.
Yet officials appear split on how comprehensive their response should be. Bundesbank President Jens Weidmann has warned against a panicky reaction, saying he would be cautious about restarting bond purchases. His Slovak colleague Peter Kazimir is leaning toward action in September, but said that any decision will need a broad consensus among Governing Council members to be credible.
To contact the reporter on this story: Piotr Skolimowski in Frankfurt at pskolimowski@bloomberg.net
To contact the editors responsible for this story: Paul Gordon at pgordon6@bloomberg.net, Iain Rogers
©2019 Bloomberg L.P.