Despite ongoing weakness in the structural inflation dynamics, the ECB’s Governing Council seems more and more adamant to announce a plan to terminate its asset purchases, explains the analysis team at Rabobank.
“Several Council members have already demonstrated their improv skills as they attempt to give a positive spin to the inflation story.”
“While Draghi kept much of the focus on the “flat and low profile” of underlying inflation during the ECB press conference, some hawkish members have begun to change their stories. Most notably, Nowotny openly questioned the feasibility of the 2% inflation target, adding that low rates of inflation despite ongoing economic growth are a global phenomenon.”
“Meanwhile, Coeuré stated that the ECB’s inflation projections are becoming less dependent on the ECB’s monetary policy. This could either be read as doubt in the effectiveness of further stimulus, or as confidence that sustained inflation dynamics are slowly returning. Either way, the Governing Council is slowly starting to tell a more optimistic (fairy) tale of inflation.”
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