Bank to lay the groundwork for further easing

Policymakers are likely to make two significant changes at their meeting next Thursday. They will probably announce that they expect to leave rates at present levels until at least mid-2020, rather than just to the end of this year as per current guidance; and they are likely to set the interest rate on the third round of TLTROs below the refinancing rate. However, as the economy and inflation will probably remain weak into next year, we suspect that the ECB will ultimately choose to re-launch its asset purchase programme – provided that Mr Weidmann doesn’t emerge as the next ECB President.