ECB: Not much in the offering - Nomura

Analysts at Nomura are not expecting too much new information to emerge from today’s ECB policy board meeting.

Key Quotes

“There will probably be an acknowledgement, however, either in the statement or from Mr Draghi at the post-meeting conference that an announcement about the APP will be made at the following meeting in October. The key macro focus at this meeting will therefore be the update of the ECB staff forecasts. We expect modest upward revisions to the GDP growth projections for 2017 and 2018. However, notwithstanding this, there will likely be a mechanical downward adjustment to next year’s inflation forecasts in light of the strength of the euro in recent months. Relative to the technical assumptions that the ECB deployed at the time of its previous forecast update in June, the trade-weighted euro exchange rate is about 4.4% higher.”

“Oil prices are also a little lower. The impact of this on the inflation forecasts will be partly mitigated however by stronger growth than previously assumed and the impact of this on the euro area output gap. The other focus will be on Mr Draghi’s comments on euro appreciation. Although the ECB is cautious about financial market tightening, we expect Mr Draghi to not make direct verbal interventions to depreciate the euro.”

“Finally, the tweaking of forward guidance on the asset programme may be in focus as well. There was a suggestion to change it at July’s meeting. However, we expect forward guidance on the asset programme to be maintained because the ECB will want to avoid sending messages that could cause an over-interpretation from the market.”