ECB preview: Taming the hawks – ING
|Carsten Brzeski, Chief Economist at ING, explains why he thinks the ECB will convey a dovish message when it meets next week to decide on its monetary policy program.
Key Quotes:
“At the start of the New Year, the ECB could currently feel as if it was in the middle of the set of a movie combining the scripts of “Groundhog Day” and “Aladdin”. Every time the ECB thinks that it bought some time and quiet, either macro developments or some ECB members’ statements (or sometimes both) undermine these plans and let the genie of speculations about policy changes out of the bottle.
While the ECB had actually tried to hush any exit speculation with the October decision for “lower for longer”, strong macro data, a general fear in financial markets that inflation is not dead and could return faster than anticipated as well as some ECB officials’ talks have recently again fueled new speculation about the future of QE.
For next week’s meeting, we expect Draghi to convey a rather dovish message, pointing to still weak inflationary pressure and also emphasizing the disinflationary impact from a stronger euro. The most important message to watch will be whether Draghi confirms the October statement that there will be no sudden end to QE.
We expect him to do so as this would be the only way to – at least – temporarily get the genie back in the bottle. It would also show Draghi’s magic of how to guide financial markets with very few words and without any action.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.