ECB preview: Dovish hold - BBH

According to analysts from Brown Brother Harriman, on Thursday the European Central Bank (ECB) will keep monetary policy unchanged. They see in December an extension of the purchase program. 

Key Quotes: 

“If the ECB did not seize upon the window of opportunity last month to provide more support, it most likely would not do so now. The most likely scenario is that while Draghi may lay some groundwork, any fresh action will likely wait until December when the staff forecasts are updated.”

“Tomorrow, Draghi can lay the groundwork by saying three things. First, he will likely anchor discussions of the trajectory of policy to inflation and the legal need to work toward its mandate. Second, Draghi will likely emphasize the ECB's flexibility and the numerous tools it within that mandate. Thirds, he will likely stress that there are no technical constraints that cannot be overcome.”

“In December, we expect the ECB to extend asset purchases for another six months and suspect that it may begin slowing its purchases (tapering) in H2 17. There seems to be little appetite to take the deposit rate into the deeper negative territory.”

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