The reactions came after the European Central Bank (ECB) Monetary Policy Committee (MPC) meeting.

People who commented included: Michael Metcalfe, global head of macro strategy at State Street Global Markets; Sophia Ferguson, senior portfolio manager for active fixed income and currency at State Street Global Advisors, and Antoine Lesné, head of EMEA strategy and research for SPDR ETFs, offer their views.

Metcalfe commented on the Eurozone’s current condition, stating: “Eurozone growth has disappointed, Italian politics has proved disruptive, but inflation and wage growth are returning. The ECB is firmly focussed on the latter and remains on track to end quantitative easing (QE) this year. But that does not mean that tightening is around the corner. The ECB has done little to alter market expectations that the first hike will come toward the end of next year. Such gradualism is deliberately designed not to unsettle markets today, but does potentially sow medium-term concerns that the ECB will lack the monetary ammunition to deal with the next Eurozone downturn when it eventually comes; if of course it is not here already.” 

Lesné elaborated her stance on the hike rate: “As expected the ECB maintained its course and is seeking to end quantitative easing (QE) by the end of 2018 and should hike rates towards end of next year. There were no expectations for a hike this month but despite the recent market turmoil in emerging markets and risk assets there was no significant deviation vs the previous meeting in July. The wage acceleration still supports gradually normalising conditions. The euro may move higher vs the US dollar and yields may be driven by other market events. This could support peripheral yields absent any political developments from the Italian budget side.”

Ferguson gave his predictions on the central bank: “Given the extent to which the ECB has telegraphed its forward guidance over the past few meetings, it is of little surprise that today’s meeting stuck to the script and set the stage for a gradual reduction in policy accommodation. Against the backdrop of improving inflation dynamics in the Eurozone, the timeline for the reduction in monetary policy has been made quite clear, but with the end of QE on the horizon, the central bank will continue to look to the data to inform whether any meaningful adjustments – either tighter or looser – are warranted.”

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