Thursday preview: ECB to keep policy unchanged as it waits for new forecasts
The European Central Bank is widely expected to hold fire on any changes to its quantitative easing programme when it meets on Thursday as it waits for new macro-economic guidance.
Economists predict the ECB will leave monthly asset purchases at €80bn until March 2017 and keep all key rates unchanged at its policy announcement.
The consensus forecast is that the central bank will announce an extension to QE at its 8 December meeting when new staff forecasts on the economy, including the first estimate for 2019, become available.
“The Governing Council will likely wait for fresh staff macroeconomic projections before they announce an extension of their monthly €80bn asset purchases beyond March 2017,” according to Berenberg economist Florian Hense.
Equally Hense believes the ECB is unlikely to announce any plans for QE tapering as it is “too early”, amid reports of tightening.
The minutes from the September meeting made clear that the ECB "remained committed" to continuing asset purchases beyond March 2017.
However, Eurozone officials were earlier this month quoted by Bloomberg as saying the ECB will gradually wind down bond purchases before the conclusion of QE and may do so in steps of €10bn.
“For the time being, the ECB wants markets to focus on a likely extension of its purchase programme, not on any potential scaling back of the stimulus in the future,” Hense said.
“In the Q&A session of Thursday’s press conference, we expect (President Mario) Draghi to emphasise again that the ECB will maintain its current stance, or provide more stimulus, for as long as necessary and that ECB projections for a gradual rise in inflation are based on the assumption of a sufficient monetary stimulus.”
Berenberg expects the ECB to start winding down QE in the autumn of 2017.
On home soil, UK retail sales data will be in focus on Thursday amid concerns about the impact of Brexit on consumer confidence. Analysts expect retail sales rose 4.4% year-on-year and 0.2% month-on-month in September.
Thursday 20 October
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