ECB may postpone QE increase until December, BofA says

The European Central Bank would refrain from another dose of quantitative easing a little longer than had been expected, analysts at Bank of America-Merrill Lynch said in a report dated 13 October.

That was their conclusion following remarks from European Central Bank governing council member Benoit Coeure on the previous day.

The central banker told broadcaster CNBC a “discussion” on more QE would be “premature”.

Such a dismissive attitude surprised the broker, given that it did not come from one of the ‘hawks’ at the ECB.

That meant it might take a little bit longer for a consensus within the ECB to take form – at a cost to the Eurozone.

Now a decision might not come until 3 December, Bank of America said, instead of 22 October.

Weaker global demand conditions, tightened financial conditions (real interest rates are up and the euro's trade weighted exchange rate is up 6.2% from the trough in April) could subtract between two and three tenths of a percentage point from the single currency area’s rate of GDP growth.

That would leave it above the economy’s potential rate of economic growth, but with no acceleration relative to this year, said Gilles Moëc, Chief Developed Europe Economist, BofA Merrill Lynch Global Research.

“We are not ruling out that Draghi manages to "force" a decision next week, but the bar on an immediate response seems to be high.

“We would not be surprised by "compromise solutions" next week, with for instance strong hints at a "thorough review of the programme by year-end," the broker said in a research report sent to clients.