ECB minutes should dampen QE taper talk

The minutes of the ECB's monetary policy meeting on 4th & 5th March should help to dampen suggestions that the recent signs of improvement in the euro-zone economy will prompt the ECB to end its quantitative easing (QE) programme before the scheduled date of September 2016. 

Governing Council members "generally shared" the assessment that the ECB's policies may already be having a positive effect and saw room for "prudent optimism" towards the economy. But they also shared the view that the QE programme launched this month was "warranted" and that it "was essential to remain firm in implementing the asset purchase plan without hesitation" until its objectives are reached. They also stated that March's more upbeat ECB staff economic forecasts reflected the expectation that the programme would be fully carried out, rather than implied that it was unnecessary.

"We very much concur with these sentiments. If nothing else, there is a clear danger that expectations of an early end to QE will unwind some of the drop in the euro, which we have long argued is vital for any meaningful recovery in the economy", says Capital Economics. 

Even if fully implemented, the ECB's QE programme will be much smaller proportionately than those ultimately needed to generate decent economic recoveries in the US and UK. If anything, there are reasons to think that the euro-zone will need more QE than those countries, not less. In short, the ECB still has a lot more work to do. And for now at least, it appears to recognize that.