ECB to extend QE until end-2017 - Goldman Sachs

The Research Team at Goldman Sachs expects that the European Central Bank (ECB) announces and extension of its asset purchase programme in December, to last until end-2017. If eligible of assets in some market segments become a constraint, the existing self-imposed limits on purchases will be relaxed according to the analysts from GS. 

Key Quotes: 

“High peripheral debt levels and lacklustre nominal GDP growth outlooks require that ECB asset purchases continue if a reversal of the sovereign yield decline seen over the past four years is to be avoided. Our expectation is that at the December meeting an extension until end-2017 will be announced (although ultimately we expect purchases to continue until end-2018).”

“We have also pushed out the first rate hike until end-2019. While the recent steepening of sovereign yield curves has eased scarcity constraints surrounding the purchase programme, ultimately a shift away from the capital key will likely bear the brunt of the adjustment if purchases are to be extended. The political sensitivities surrounding such an announcement suggest it will be implemented ‘below the radar’ as a technical adjustment in order to exploit the inbuilt flexibility of the current programme.”