ECB Preview: No change in the message or the tone is the most likely outcome - Barclays

The Barclays Research Team offers a sneak peek at what to expect from Thursday’s European Central Bank (ECB)   monetary policy decision due to be announced at 1145 GMT.

Key Quotes:

“On the policy front, at the June meeting the ECB announced the end of net asset purchases starting in January 2019 and provided forward guidance on policy rates by signallng no hikes "at least through the summer" of 2019. Following the announcement, we adjusted our baseline scenario for the ECB and expect the first DFR hike of 15bp in September 2019 followed by a second one of +25bp both in the DFR and the MRO in March 2020. Following the announcement, markets pushed out the pricing for the first 10bp rate hike from June to October 2019. 

All the ECB communications since the June meeting, including at the ECB July meeting, have delivered a message consistent with that of the June announcement and have also signaled that the governing council is pleased with the market move and pricing. In sum, no change in the message or the tone is the most likely outcome for the September meeting next week. 

Our baseline is for no change in the staff macroeconomic forecast; however, we think that there is a possibility that the ECB June forecast for GDP growth of 2.1% for 2018 will be revised down slightly. 

That said, at this point there should be no fundamental reason to make any changes to the 2019 and 2020 forecasts. As for inflation, we do not rule out minor (+/- 0.1pp) adjustments to the headline inflation on the basis of an update of volatile components, such as energy, food or the currency.”