Industry commentators have warned the European Central Bank (ECB) will not be able to normalise monetary policy next year despite market expectations of an interest rate hike in September 2019.
On 26 November, ECB President Mario Draghi said the Bank was still planning to halt its €2.5trn bond-buying programme at the end of the year despite "somewhat weaker than expected" eurozone growth.
Last month, the European Commission's statistics agency Eurostat revealed eurozone GDP grew at its slowest rate in four years in Q3, expanding by just 0.2% in the three months to the end of September, with its largest economy Germany contracting by 0.2%.
Speaking to a European Parliament committee in Brussels, Draghi said: "A gradual slowdown is normal as expansions mature and growth converges towards its long-run potential.
"Some of the slowdown may also be temporary. In fact, the latest data already show some normalising of production in the car industry which has been impeded by one-off factors.
"Generally there is good reason to be confident that underlying inflation will gradually rise in the period ahead."
Draghi added ending the current monthly €15bn net asset purchases was subject to the upcoming eurozone inflation data, which rose to its highest level since 2012 in October, hitting 2.2%, largely due to the spike in oil prices.
However, despite Draghi's positive outlook, Philippe Waechter, chief economist at Ostrum Asset Management, has warned weaker eurozone growth in 2019, a less supportive global environment and a fall in inflation would force the ECB to keep monetary policy at the current level once it halts the asset purchases.
Waechter explained the dramatic fall in oil prices, which have entered a bear market in recent weeks, would push the headline inflation rate in the eurozone back down to the 1% mark, way below the ECB's 2% target.
Furthermore, Europe is contending with a number of political issues, most notably the Italian budget. In the most recent turn of events, Prime Minister Giuseppe Conte has said it will stick to its spending plans following a meeting with deputies Matteo Salvini and Luigi Di Maio.
The European Commission has already threatened Rome with fines unless it changes its plans but it appears as if the stand-off will continue.
"Due to more heterogeneous behaviours and uncertainty at the political level, global growth in 2019 will become weaker than in 2017 and 2018," Waechter predicts.
"[Meanwhile], inside the euro area, there are no coordinated policies that may boost growth," he continued. "This framework is not a source of monetary policy normalisation."
Chris Iggo, CIO, fixed income at AXA Investment Managers, agreed the growth and inflation outlook would prevent the ECB from doing anything more aggressive than ending QE and taking the deposit rate back to zero.
Even with the continued support from the ECB next year, Iggo said it would be hard to generate positive returns in this environment.
"Europe is still waiting for Godot," he said. "It is hard to generate the same enthusiasm for Europe.
"With the Italian saga likely to continue into next year and with Brexit potentially disrupting some sectors, it is hard to be optimistic on spreads just now."