The European Central Bank left monetary policy unchanged today. According to analysts from TDS the ECB will cut rates by the end of 2016 and it could also taper its QE program. “The key message was that they had little new data to go on, and would await the next round of macroeconomic projections in September before assessing the need for additional easing. In his press conference, President Draghi repeated— many times—that the ECB’s Governing Council remains ready, willing, and able to act as necessary, using all necessary instruments.” “Going forward, while the central banks of Mauritius and Malaysia have already eased policy on Brexit spillovers, it’s really the euro area that will feel the brunt of the UK’s decision to leave the EU. These spillovers will take time to materialise, but are likely to weigh on euro area growth somewhat over the medium term, something that the ECB will be keeping a close eye on.” “We continue to expect the ECB to cut the deposit rate by 10 to 20bps by the end of 2016, and to likely taper its QE program through 2017.” “With growth slowing and inflation expectations still well below the ECB’s 2% target over the coming two years, the ECB will be biased towards easing later this year. While we had thought that the easing could come as soon as September, the orderliness with which markets have adjusted to the Brexit vote suggests that this might come later on in the year.” “As we approach the end of the year, it’s likely the Governing Council will see the need to taper its QE program gradually, rather than let it abruptly stop in March 2017, though this tapering might initially come through lower government bond purchases rather than corporate bonds.”