Major investment banks expect the ECB to maintain its pacifist stance at the meeting this week. Although, inflation has reached the 2% target. For a full overview of the banks expectations, you are advised to check the March ECB meeting preview.
8 March, AtoZForex – The inflation in the Eurozone is on target, is still too early to discuss any tapering to the European Central Bank (ECB) massive purchase program. Moreover, the ECB maintain its pacifist stance at the meeting this week although inflation has reached the 2% target. They do not expect the ECB to react the stronger inflation figure, though driven by the volatile energy and unprocessed food price inflation.
March ECB meeting preview
The overall market expectation is that the ECB does not change its monetary policy based on rising in inflation. Moreover, the preceding statement from the latest ECB meeting it was communicated that the Governing Council will continue to look through changes in HICP inflation if judged to be impermanent.
Danske Bank – No announcement of QE purchases tapering
According to analysts from Danske Bank, the ECB will not commence tapering of its QE program, before the core inflation will exceed 1.0% for at least a couple of months. Along with the comment of Benoît Cæuré in December 2016; “we are still waiting for signs that core inflation is on the rise and will clearly exceed 1%’, the bank believes that the ECB will not announce any tapering of QE purchases in 2017.
“Our forecast for core inflation is it will be 0.9% on average this year and only go slightly above 1.0% at the very end of the year. We still believe the ECB will extend its QE purchases beyond December 2017. From a market perspective, expectations are very low with a zero probability of a move in the deposit rate at the upcoming meeting. The market is pricing a 50% probability of a full 10bp hike in January next year, which in our view is premature.”
RBC Capital Markets – ECB will leave rates unchanged at meeting
Economists at RBC Capital Markets (CM) expect that the upcoming ECB monetary policy will be a non-event. RBC Capital Markets believes that the central bank will leave rates unchanged when it meets on Thursday.
BofA Merrill – ECB meeting will be a non-event for EUR
Similar like RBC Capital Markets, the BofA Merrill predicts that the March ECB meeting will be a non-event for EUR. Previous year, Mario Draghi extended QE, in order to buy extra time. Hence, the bank believes that the ECB president intends to utilize it.
Nevertheless, Mario Draghi do expect that the ECB will face challenges later in 2017. As the markets will inquiry for answers about the QE future. However, this would come too soon for tomorrow’s meeting. Hence, according to BofA Merrill March ECB meeting preview, it should be a non-event tomorrow:
“We think the current “truce“ between the hawks and doves will be reflected in a dovish tone by Draghi this week, with no decision. After the summer, though, we think a proper debate about the future of QE will be unavoidable.”
The EURUSD en route to 1.03 this Month ahead of parity by mid-year. EURUSD touched lower in February and the forecast for EURUSD in the Q1 ending is a little aggressive.
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