ECB minutes strengthens view of June 2019 as the earliest possible date for a rate hike - ING

Peter Vanden Houte, Chief Economist at ING, points out that the minutes of the lastest European Central Bank meeting reveal an improved confidence in the recovery, but also  a growing uneasiness regarding low inflation.

Key Quotes: 

“Assessing the inflation outlook, the Governing Council seemed to suffer from a bout of confusion. On the one hand, it expressed high hopes that on the back of the improving growth picture would lead to an adjustment of the path of inflation towards the Governing Council’s inflation aim. On the other hand, it noted the lack of convincing signs of a sustained upward trend in measures of underlying inflation.”

“It was remarked that recent movements in the euro exchange rate seemed to relate more to relative monetary policy shocks, including communication, and less to improvements in the macroeconomic outlook for the euro area. This suggested that the exchange rate appreciation could be expected to have a more negative impact on inflation.”

“Even though the ECB removed the easing bias attached to the QE programme, it is well aware that inflation threatens to remain subdued for longer than expected. That means that monetary policy will have to stay extremely loose for some time to come.”

“The minutes strengthen us in our belief that June 2019 will be the earliest possible date for a rate hike and chances are high that it will be even later.”