ECB to extend QE to end-2017 - Commerzbank

Christoph Weil, analyst at Commerzbank said that with core inflation likely to continue undershooting ECB projections, they expect the central bank to extend bond purchases to end-2017.

Key Quotes

“At the meeting on Thursday, the ECB Council discussed neither an expansion of its bond purchase programme nor an exit. Nor was anything said about a possible shift in the programme's parameters. These points will not come up until December, when the Council will have the new growth and inflation projections, and the findings of the various working groups which deal with changes to the rules of the bond purchase programme will be available.”

“It is fair to assume that the bank is internally considering tapering, but there is a serious risk that any hint of this taking place will be taken by the markets as a sign of the programme coming to an end.”

“However, Draghi did at least indicate that purchases would not be halted abruptly. The end is a long way off, though. With core inflation likely to continue undershooting ECB projections, we expect the central bank to extend bond purchases to end-2017.”

"However, we estimate that under the current regulations the ECB would no longer be able to find sufficient Bunds suitable for purchase by early summer 2017. Consequently, in December the Bank will have no choice but to change the rules of the programme.”