Gently does it

After outlining the start of its exit strategy last month, we doubt that the ECB will announce any further changes at the forthcoming meeting. The Bank might increase the interest rate on its threemonth loans in the not too distant future or return to auctioning funds off at variable rates, but only if market conditions continue to improve. And either way, it will continue to stress that the economic recovery will be modest, implying that inflation should not be a concern for a very long time. Official interest rates should therefore remain on hold for much longer than markets expect.