The ECB is increasingly a victim of its own success. With the economic recovery strengthening, the overall monetary strategy – a downbeat narrative supporting quantitative easing (QE) and negative interest rates – is under pressure. More rate hikes from Federal Reserve will allow ECB to take baby steps towards normalization over the coming year without a strong euro appreciation. I expect quantitative easing (QE) to be gone by mid-2018 and negative deposit rate by end of year.

171004 ECBs growing dilemma

 

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