Weekly Economic Briefings > Eurozone Weekly Economic Briefing > Eurozone

The ECB surprised in a hawkish direction this week arguing that modest downward revisions to its forecast were not sufficient to warrant a major policy change. This lack of action probably hides deep divisions on the Governing Council over what to do next. In Germany, where the ECB could run out of eligible bonds in as little as six months, there is widespread political opposition to anything that might expose the Bundesbank to capital losses. With the various Eurosystem committees now tasked with examining the ECBs options, we see the ECB in data-dependant mode with a decision on whether to extend the existing asset purchase programme deferred until December. Any undershoot of inflation would almost certainly trigger an extension of QE.