ECB not seen delivering further hawkish communications - Nomura

In the view of analysts at Nomura, the European Central Bank (ECB) will refrain from delivering any hawkish communication at its monetary policy announcement today, in the wake of recent softer inflation data.

Key Quotes:

“We are not expecting too much new information to emerge ...

The minutes from the December meeting surprised market participants in suggesting the Council plans to revisit the asymmetric nature of the forward guidance on QE early this year, sooner than was previously assumed. However, we think it more likely that the QE bias will be removed at the March meeting when the ECB will release its macroeconomic projections.

Meanwhile, with recent inflation data subdued and a still high level of uncertainty about how tighter financial conditions might affect the economic outlook, we doubt whether the ECB will deliver further hawkish communications at present.

Still, on a multi-month horizon, we believe the region's pace of growth and the level of inflation will surprise the ECB on the upside. And that will pave the way for a signal in the middle of the year that the APP will not continue beyond September. We believe that will then pave the way for some softening of the forward guidance on interest rates in Q3 and then a 10bp depo rate hike by the end of the year.”