Peter Allen Goves (MFS Investment) | The need to avoid premature tightening by the ECB and the strengthened guidance is supportive for core rates in our view. The strong association of guidance with the inflation outlook will also probably raises the prominence of the projections. Overall, the new guidance reinforces the ECB’s commitment to maintain accommodation to reach its price stability aim.
Given that projections remain below target, this means policy normalisation is likely to be slow and gradual to enable ongoing policy support. Core rates look set to remain low for the foreseeable future. Ongoing QE at a high pace is also supportive for EGB spreads over the coming months too.
