ECB to reconsider policy at the September meeting - BBH

ECB President Draghi signaled that central bank would reconsider policy at the September meeting when officials return from summer holidays, and new staff forecasts will be available, notes the analysis team at BBH.  

Key Quotes

“Draghi's suggestion that the market over-interpreted his "reflation" comment at the Sintra conference implies that the ECB may have been somewhat surprised by the market's reaction.  Nevertheless, Draghi showed barely any concern about the rise in European interest rates and the euro's appreciation.”  

“Money supply growth (M3) is expected to have expanded at a steady pace of 5% over the past year through June. The Bank Lending Survey, released on July 18, confirmed that improvement in credit conditions.  Lending is slowly improving, and there has been a small pickup in demand from non-financial businesses.  The flash July PMI for the eurozone came in weaker than expected at 55.8, a six-month low.  Germany saw both manufacturing and services weaken, while France saw manufacturing improve and services weaken.”

"Country-data may be more interesting than the aggregate data.  In particular, Germany, France, and Spain offer preliminary looks at July inflation.  On a monthly basis, consumer prices may have eased, but the year-over-year rates are expected to be little changed at 1.4%, 0.8%, and 1.6% respectively.  Only the German reading is changed from the June pace and by 0.1% at that.”