The September meeting will bring updated set of staff projections but likely no change in policy setting. After strong survey data over the summer, the short term growth forecast could well be upgraded, but with EUR-USD turning out to be much stronger than assumed in the June projections the strong currency will leave its mark on the inflation forecast. Forex and bond markets remain very sensitive to tapering speculation and that will likely see the ECB moving extremely carefully going ahead especially as geopolitical risks have picked up further. Indeed, that the ECB will lay out a full schedule for the phasing out of asset purchases this year seems increasingly unlikely and while officials still start to debate changes to policy parameters at the September meeting, a decision is unlikely to come before October. This is pretty much consensus and seemed to be confirmed by a Bloomberg source story yesterday, saying officials have been presented with several options for the policy schedule going into 2018, but also cited sources as saying that a decision is unlikely before October.
The market will paw over any references to :-
- Asset Purchase Reduction “unwinding” all the bonds and other stuff they keep buying each month.
- Comments about the outlook for Inflation and Growth (Inflation lower – Growth higher) has been the ECB’s mantra.
- Any reference to the “value” of the EURO; if it’s not mentioned directly in the statement Mr Draghi will be pushed for a comment in his press conference.
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