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We're breaking protocol this week by delivering our preview for Thursday's ECB meeting in today's Monitor.
The ECB made no changes to its policy stance yesterday.
Markets are becoming more sensitive to rumours about changes in ECB policy. The euro and yields jumped on Friday after a Bloomberg report that the central bank has discussed raising rates before QE ends.
The ECB will leave its main refinancing and deposit rates at 0.00% and -0.4% unchanged today, and it will also maintain the pace of QE at €30B per month.
Barring a meteor strike, the ECB will leave its main refinancing and deposit rates unchanged today, at 0.00% and -0.5% respectively.
The ECB broadly conformed to markets' expectations today. The central bank maintained its key refinancing and deposit rates at 0.00% and -0.4% respectively, and delivered the consensus package on QE.
The ECB will leave its key refinancing and deposit rates unchanged today, at 0.00% and 0.5%, respectively, but we are confident that the central bank will expand its existing stimulus efforts via a boost and extension of the Pandemic Emergency Purchase Program.
We predict no major policy changes at the ECB today. We think the central bank will leave its main refinancing and deposit rates unchanged at 0.00% and -0.4%, respectively. We also expect the ECB will leave the pace of QE unchanged at €60 per month until December 2017, at least.
The ECB made no changes to its policy stance yesterday. The central bank left its refinancing and deposit rates at 0.00% and -0.4%, respectively, and maintained the pace of QE at €60B per month. The program will run until December "or beyond, if necessary."
Financial markets have put maximum pressure on the ECB going into today's meeting, but we doubt it will be enough to spur the governing council into action so soon after announcing additional stimulus in December. We think the central bank will keep its refi and deposit rate unchanged at 0.05% and -0.3% respectively, and maintain the pace of asset purchases at €60B a month.
Even Charles Dickens could not have written a more dramatic prologue to today's ECB meeting. Elevated expectations ahead of major policy events always leave room for major disappointment, but we think the central bank will deliver. Advance data yesterday indicated inflation was unchanged at 0.1% year-over-year in November, below the consensus 0.2%, and providing all the ammunition the doves need to push ahead. We expect the central bank to cut the deposit rate by 20bp to -0.4%, to increase the pace of bond purchases by €10B to €70B a month, and to extend QE to March 2017.
The ECB made no changes to policy yesterday, leaving its key refinancing and deposit rates unchanged, at 0.00% and -0.5%, and confirmed that it will restart QE in November at €20B per month.
The broad strokes of yesterday's ECB meeting were in line with markets' expectations. The central bank left its main refinancing and deposit rates unchanged, at 0.00% and -0.4% respectively, and maintained the same forward guidance.
Our suggestion that the ECB could still raise the deposit rate later this year, by 20bp to -0.4%, has met with strong scepticism in recent conversations with readers.
The ECB did its utmost not to say or do anything remotely novel today. The central bank kept its main refinancing and deposit rates unchanged at 0.00% and -0.40%, respectively, and reiterated its plan for QE next year.
What to expect from the ECB as Ms. Lagarde takes the seat as new president?
Yesterday's August PMI data in the euro area ran counter to the otherwise gloomy signals from the ZEW and Sentix investor sentiment indices.
From a macroeconomic perspective, the main shift in the ECB's policy stance last week was the change in forward guidance.
The BoJ kept its main policy settings unchanged yesterday, in another 7-to-2 split.
The ECB conformed to expectations today, at least on a headline level.
Yesterday's ECB meeting was a snoozer, just as we predicted.
Swoons in EZ investor sentiment are not always reliable leading indicators for the economic surveys, but it is fair to say that risks for today's advance PMIs are tilted to the downside, following the dreadful Sentix and ZEW headlines earlier this month.
The Eurozone's sovereign bond markets are dying, and this is a good thing, by and large.
Yesterday's economic data provided further evidence that GDP growth in the EZ economy slowed in Q2.
he ECB governing council gathered last week under the leadership of Ms. Lagarde for the first time to lay a battle plan for the course ahead.
We'll cover Friday's barrage of EZ economic data later in this Monitor, but first things first. We regret to inform readers that the ECB is behind the curve. Last week, Ms. Lagarde downplayed the idea that the central bank will respond to the shock from the Covid-19 outbreak.
A Reuters interview yesterday with ECB governing council member Benoît Coeuré cemented expectations that the ECB will adjust its language on forward guidance next month.
As we go to press, Mr. Draghi is set to give the opening remarks for the 2019 ECB central banking forum in Sintra, and later today, at 09:00 CET, the president delivers his introductory speech.
The imminent boost to lending rates from the shut- down of the Term Funding Scheme at the end of this month is widely under-appreciated.
Economists refer to two different types of forward rate guidance by central banks: Delphic and Odyssean. The former describes a "normal" situation, in which the central bank follows a transparent rate-setting rule allowing markets to forecast what it will do, based on the flow of economic data.
The euro's ascent in the past few months raises two main questions for investors.
We still don't have the complete picture of what happened to the EZ construction sector in Q2, but we have enough evidence to suggest that it rolled over.
The ECB's communication to markets has been clear this year. In Q1, the central bank changed its stance on the economy towards an emphasis on "downside risks to the outlook".
The latest E.C. survey shows the gap between firms' and households' confidence levels has remained substantial.
The key aspects of the ECB's policy stance will remain unchanged at today's meeting.
The ECB took another big step yesterday in assuring markets that it won't waver in the fight against Covid-19.
We have spent the past few weeks shifting our story on the EZ economy from one focused on slowing growth and downside risks to a more balanced outlook. It seems that markets are starting to agree with us.
We recommend that investors take yesterday's inflation data in the Eurozone with a pinch of salt. The headline rate slipped to 1.2% in April, from 1.4% in March, hit by a slide in core inflation to 0.7%, from 1.0%.
Many analysts were alarmed earlier this week by news from across the pond that the U.S. treasury is planning to break the bank in the fight against Covid-19.
The MPC struck a less dovish tone than markets had anticipated yesterday.
Calling the ECB has suddenly become a lot more complicated.
The ink has hardly dried on economists' and the ECB's inflation projections for 2020, but we suspect that some forecasters are already considering ripping up the script.
It says a lot about investor expectations that markets' reaction to yesterday's policy announcement by the ECB was marked by slight "disappointment," with EURUSD rallying and EZ bond yields rising.
Last week's final barrage of data showed that EZ headline inflation rose slightly last month, by 0.1 percentage points to 1.5%, driven mainly by increases in the unprocessed food energy components.
Markets were left somewhat disappointed yesterday by the G7 statement that central banks and finance ministers stand ready "to use all appropriate policy tools to achieve strong, sustainable growth and safeguard against downside risks."
Growth in households' disposable incomes has been supported in recent years by falling debt servicing costs. The proportion of households' incomes absorbed by interest payments fell to a record low of 4.5% in Q4 last year, down from 4.7% a year ago and a peak of 10% in 2008.
Markets were all over the place yesterday in response to the messages from the ECB.
Today's ECB meeting will mainly be a victory lap for Mr. Draghi--it is the president's last meeting before Ms. Lagarde takes over--rather than the scene of any major new policy decisions.
Today's ECB meeting will be a snoozer.
Bond yields in the Eurozone took another leg lower yesterday.
The PBoC cut its seven-day reverse repo rate to 2.20%, from 2.40%, while making a token injection; the Bank only moves these rates when it injects funds.
Today will be an extremely busy day in the euro area economy. We laid out our expectations for the data in Tuesday's Monitor--see here--and we'll preview the ECB meeting in today's report.
Yesterday's final manufacturing PMIs confirmed that the headline index in the euro area rebounded further last month.
The ECB will deliver a carbon copy of its December meeting today, at least in terms of the main headlines.
The ECB and Ms. Lagarde played it safe yesterday.
It's still unclear how exactly Covid-19 will impact the euro area as a whole, but little doubt now remains that Italy's economy is in for a rough ride.
The MPC went against the grain last month by forecasting that CPI inflation would overshoot the 2% target if it raised Bank Rate as slowly as markets anticipated.
The MPC's pause for breath last week disappointed a majority of investors, who thought that it would at least tweak aspects of the support programmes put in place in March.
The balance of risks is finely poised ahead of today's ECB meeting.
In this Monitor we'll let the data be, and try to make some sense of the recent market volatility from a Eurozone perspective, with an eye to the implications for the economy and policymakers' actions.
Mr. Draghi's introductory statement before yesterday's hearing at the European Parliament repeated that the ECB will "review and possibly reconsider its monetary policy stance in March." But it didn't provide any conclusive smoking gun that further easing is a done deal.
The ECB will rest on its laurels today.
Yesterday's economic reports in the Eurozone were ugly.
The big story in financial markets at the moment is the idea that major global central banks are about to embark on a policy easing cycle.
Friday's data added further colour to the September CPI data for the Eurozone.
The Fed paved the way with a 50bp emergency rate cut on March 3, with more to come.
On a headline level, the ECB conformed to expectations yesterday.
Chancellor Javid's resignation, only eight months after assuming the role, is the clearest sign yet that the Johnson-led government wants fiscal policy to play a bigger part in stimulating the economy over the next couple of years.
Car registrations, French inflation, advance PMIs and a central bank meeting make up today's substantial menu for investors in the euro area.
Last week's decision by the ECB to keep rates unchanged until the beginning of 2020, at least, raises one overarching question for markets.
Yesterday's ECB meeting was a tragedy in two acts. Markets were initially underwhelmed by the concrete measures unveiled, and they were then shell-shocked by Ms. Lagarde's performance in the press conference.
The ECB is unlikely to make any changes to its policy stance today. We think the central bank will keep its refinancing and deposit rates at 0.00% and -0.4%, respectively, and maintain the pace of QE at €60 per month until the end of the year. We also don't expect any substantial change in the language on forward guidance and QE.
The ECB held fire yesterday and kept its main refinancing and deposit rates unchanged at 0.0% and -0.4%, respectively. The central bank also left the pace of monthly asset purchases unchanged at €80B. The introductory statement overall confirmed the central bank's dovish stance.
The ECB will keep its refinancing and deposit rates unchanged today, at 0.0% and -0.4% respectively. We also think the pace of QE will be held at €80B per month. Attention will turn instead to the details and implementation of the measures unveiled last month. Corporate bonds will be added to QE at the end of the second quarter, and monthly purchases of about €5-to-€10B per month are a realistic assumption.
The ECB will not make any adjustments to its policy stance today. We think the central bank will keep its main refinancing and deposit rates unchanged at 0.0% and -0.4%, respectively, and also that will maintain the pace of QE purchases at €80B a month. The updated macroeconomic projections likely will include a modest upgrade of this year's GDP forecast to 1.5%, from its 1.4% estimate in March.
Political uncertainty has surged since the ECB last met, but the central bank likely will refrain from action today. We think the ECB will keep its refi and deposit rates unchanged at 0.05% and -0.4%, respectively, and leave the monthly pace of QE unchanged at €80B.
Our base case remains a 10bp cut in the deposit rate, to -0.5%, in September.
Yesterday's ECB meeting was a much more assured affair, compared to the March calamity. The central bank left its key refinancing and deposit rates unchanged, at 0.00% and -0.5%, respectively, and also maintained the pace and guidance on its two asset purchase programs.
As expected, the ECB made no changes to its policy stance today. The refi and deposit rates were left at 0.00% and -0.4%, respectively, and the pace of purchases under QE was maintained at €30B per month.
The ECB made no major policy changes yesterday. The central bank kept its refinancing and deposit rates unchanged at 0.00% and -0.4% respectively, and the scheduled reduction in the pace of QE to €60B per month was confirmed. The core part of the central bank's language retained its dovish bias.
The ECB will leave its main refinancing and deposit rates unchanged at 0.00% and -0.4%, respectively,
The ECB's key message was unchanged yesterday. The main refinancing and deposit rates were maintained at zero and -0.4%, respectively, and they are expected "to remain at their present levels at least through the summer of 2019."
The ECB will keep all its policy parameters unchanged today. The refi and deposit rates will be maintained at 0.00% and -0.4%, respectively, and the pace of QE will stay at €60B per month, running until the end of the year.
Today's ECB meeting will follow the same script as in July. No-one expects the central bank to make any formal changes to its policy settings. The ECB will keep its main refinancing and deposit rates at zero and -0.4%, respectively.
The headline changes in yesterday's ECB policy announcement were largely as expected. The central bank left its main refinancing and deposit rates unchanged at 0.00% and -0.4% respectively, and maintained the pace of QE at €60B per month. The central bank also delivered the two expected changes to its introductory statement. The reference to "lower levels" was removed from the forward guidance on rates, signalling that the ECB does not expect that rates will be lowered anytime soon.
The ECB made no major policy changes yesterday, but tweaked its communication. The key refinancing and deposit rates were kept at 0.00% and -0.4%, respectively, and the pace of QE was maintained at €30B per month.
Eurozone GDP growth likely slowed in Q2...teeing up a deposit rate cut in September
Short-term interest rates in the Eurozone continue to imply that the ECB will lower rates further this year. Two-year yields have been stuck in a very tight range around -0.5% since March, indicating that investors expect the central bank again to reduce its deposit rate from its current level of -0.4%. This is not our base case, though, and we think that investors focused on deflation and a dovish ECB will be caught out by higher inflation.
On all accounts, the ECB announced a significant addition to its stimulus program yesterday. The central bank cut the deposit rate by 0.1%, to -0.3%, and extended the duration of QE until March 2017. The ECB also increased the scope of eligible assets to include regional and local government debt; decided to re-invest principal bond payments; and affirmed its commitment to long-term refinancing operations in the financial sector for as long as necessary. The measures were not agreed upon unanimously, but the majority was, according to Mr. Draghi, "very large".
The ECB will keep its main refinancing and deposit rates unchanged at 0.00% and -0.4% today, but we think the central bank will satisfy markets' expectations for more clarity on the QE program next year.
The ECB stood pat yesterday, keeping its key refinancing and deposit rates unchanged at zero and -0.4%, respectively. The marginal lending facility rate was also left at 0.25%, and the monthly pace of QE was maintained at €80B, with a preliminary end-date in the first quarter of 2017. Purchases of corporate bonds will begin June 8, and the first new TLTRO auction will take place June 22.
It's always dangerous when risk assets rally strongly into an ECB meeting, but we doubt that investors have much to fear from today's session in Frankfurt. We think the central bank will leave its main refinancing and deposit rates at 0.00% and -0.4% respectively.
Yesterday's ECB meeting painted a picture of a central bank in wait-and-see mode. The main refinancing and deposit rates were kept at 0.00% and -0.4% respectively, and the marginal lending facility rate also was unchanged at 0.25%.
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