Back to business for the ECB?

The election of Emmanuel Macron as France’s next president has removed a big risk to the euro-zone economic outlook. This could allow the ECB to stop worrying about political risks and to concentrate more on the euro-zone’s healthy economic performance. Indeed, the ECB’s long-held position that the risks to the economic outlook are “skewed to the downside” is becoming harder to defend. Accordingly, at the next press conference on 8th June, the Bank is likely to end its pledge to keep interest rates at current “or lower” levels for an extended period. And we think that it will taper its asset purchases to zero in the first half of next year. That said, while the ECB may be preparing to ease the pressure off the monetary policy accelerator, it is nowhere near ready to hit the brake.