In line with our expectations, the ECB announced today the end of its QE program by end-2018 – albeit it retained some flexibility by making the final decision subject to incoming data. After September the pace of monthly purchases will be reduced from 30 to 15 billion euro. Key interest rates are expected to remain at the current level at least throughout the Summer of 2019 in line with our base case of a first rate hike in September of next year, a month before President Mario Draghi completes his eight-year term. The ECB’s new round of economic projections confirmed Eurozone growth fore¬casts at +1.9% and +1.7% for 2019 and 2020, respectively, with the estimate for 2018 cut from +2.4% to +2.1%. Mean¬while the inflation forecasts for the period 2018-2019 were upgraded from 1.4% to 1.7%, driven by higher oil prices, with the 2020 estimate unchanged at 1.7%. Certainly today’s announcement came at a convenient moment, with yesterday’s message by the Fed to pursue a more aggressive tightening path compared to what markets expected bound to keep a lid on any EUR appreciation.
