ECB: no further accommodation expected beyond March 2017 - Nomura

Analysts at Nomura explained that the ECB consistent outlook supports no increase in accommodation after March overall.

Key Quotes:

"The developments between September and today’s meeting have been supportive of the September ECB staff macroeconomic projections and contributed to no substantial change in the ECB’s growth and inflation outlook assessment. Paragraphs in the introductory statement from the October and the September meetings were roughly identical. On the growth side, the Governing Council continues to expect an ongoing expansion at a moderate but steady pace supported by monetary policy measures. Risks to the outlook remain skewed to the downside, mainly owing to the weak external environment.

On the inflation front, the ECB’s assessment sees headline inflation increasing further in 2017 and 2018 largely owing to energy base effects. However, the Governing Council noted that “there are no signs yet of a convincing upward trend in underlying inflation”, somewhat switching the focus to core inflation developments as the relevant parameter for its policy re-assessment away from the headline inflation prints.

As we emphasised previously, an outlook in line with its projections would see no need for a further increase in the level of policy accommodation. Therefore, in the absence of any downside risks materialising, which is supportive of the ECB’s projections, there is an increasingly substantial possibility of no further accommodation beyond March 2017 – a possibility that this meeting did not dispel.