End of ECB bond purchases nears
The end of ECB bond purchases nears
However, we complement our outlook by a risk outlook this year. For the first
time in the current cycle, which started in 2009, higher interest rates are a
serious but difficult-to-quantify risk. The ECB announced at the end of 2017 that
it would buy bonds worth “only” EUR 30 bn each month from January (down
from EUR 60 bn).
By summer at the latest, the ECB should begin to
communicate its timetable for bond purchases after September. If the economy
continues to boom by then and if inflation and inflation expectations approach
the target of 2%, the end of the ECB bond purchases might be near. And if the
main buyer of government bonds drops out of the market, yields may rise. Still,
we believe that German mortgage rates are unlikely to rise by more than 100
bp. The ECB is quite interested in engineering a smooth exit from its ultra-loose
monetary policy and would likely intervene again in case of an excessive rate
increase.
EU Forecast
euf:ba.18.j:173/nws-01