ECB still hesitant to pull out all the stops

Euro-zone interest rates will almost certainly be on hold in June, but the focus has shifted to any developments regarding unconventional policies. The Bank is likely to confirm its intention to start purchasing covered bonds with more or less immediate effect. However, such purchases will be minimal and aimed at restoring liquidity to a troubled market rather than boosting the economy more generally. We doubt that the ECB will announce any other major changes this month, but still think that bolder action is warranted, perhaps involving outright ‘quantitative easing’ in future.