ECB likely to stick to the script - Rabobank

According to the analysts at Rabobank, today’s show is titled the ECB press conference, starring Mr. Draghi and after December’s commitment to keep the asset purchase programme in place until the end of this year, this ECB meeting should bring no surprises with respect to both rates and the ECB’s pace quantitative easing and expect both policy tools to remain unchanged.

Key Quotes

“With no market expectations of a policy change either, attention will be on the details: will President Draghi stick to his script, or can we expect some improv?”

“The new staff projections will likely herald higher 2017 inflation, but Mr. Draghi will probably dismiss this as a purely technical adjustment driven primarily by food and energy prices. We consider it too early for the ECB to substantially upgrade the economic outlook or its risk assessment. Following that same line of thinking, it also seems too early for the central bank to change its forward guidance into a more neutrally worded one – despite calls from various GC members to reassess the ECB’s promise that “[rates] remain at present or lower levels for an extended period of time”.”

“However, during the press conference there may be some room for President Draghi to add more nuance to the press statement. When asked about the higher inflation figures, he may carefully state that risks to the outlook –although still tilted to the downside– are slowly diminishing. Questions about the Council’s stance on forward guidance may get an answer that suggests that it is, or will soon become, a topic of discussion in the GC meetings.”

“President Draghi will have to choose his words carefully so that he does not leave markets with the impression that the Council is in a hurry to change course. Such a message would probably not be received with the same calm as the FOMC’s major policy shift last week.”