ECB meeting: Expecting the unexpected - Nomura

Christophe Duval-Kieffer, Research Analyst at Nomura, suggests that at its June meeting, we expect little from the ECB; however, there is potential for inflation projection revisions to be quite large, which would send an important signal on the ECB’s future monetary stance.

Key Quotes

“We think investors should carefully gauge the new projections against their potential upper bound to get a real sense of where the ECB is heading – risks of higher real yields are not negligible.

Assessment time

Market participants have low expectations about changes in the ECB’s monetary stance at the forthcoming ECB meeting held in Vienna on 2 June. One obvious reason is that the new measures decided at the meeting on 10 March have not been implemented yet and the ECB will of course want to assess the impact of these new measures – lower short-term rates, an increase and broadening of the asset purchase programme and targeted long-term refinancing operations.

The first TLTRO is scheduled for later this month and corporate bond purchases (CSPP) will start before the end of the. As a consequence, no further policy initiatives should take place at this meeting.

Projections to be revised

There are several factors contributing to a revision in the ECB staff’s projections in June. The most apparent is owing to the new level of oil prices and commodity prices in general. Our measure of global prices has sharply increased in the past two weeks.”