The rising global uncertainty is now making it much harder for the European Central Bank to identify the right timing and speed for exiting its expansionary monetary policy stance. I still expect the ECB to end its QE program by the end of 2018, but the ECB will need to change its communication strategy. In order to remain flexible the ECB should not pre-commit itself to a particular policy path. This will fuel German objections, but it is important for the ECB in order to succeed with a smooth and gradual policy exit.
A positive development is the stronger than expected rise in wage growth in Germany, which will raise inflation in Germany and therefore also in the euro area. This will make it easier for the ECB to achieve its price stability mandate and strengthen it in its exit decision. Yet there is no serious concern about an overheating economy or excessive inflation in Germany.