ECB Preview: 7 Major Banks Expectations from ECB’s April Meet
As we head towards the ECB’s April meeting, following are the
expectations as forecasted by the economists and researchers of 7 major
banks. After last meeting’s package of measures and negative rates, all
the 7 major banks are expecting ECB to remain on the side lines with
the major focus on Draghi’s press conference wherein he can add some
further detail to the TLTRO-II programme, or the corporate debt
purchases.
Rabobank
The majority
of the additional easing measures announced in March is not yet in
effect. While there are still measures pending implementation, we do not
expect the ECB to come up with any new stimulus. Draghi may use the
press conference to add some further detail to the TLTRO-II programme,
or the corporate debt purchases.
ING
After
months of excitement and two new attempts by the ECB to revive the
Eurozone economy, today’s ECB meeting should be light on new action. The
stronger euro will also keep any acceleration of inflation at bay,
providing the ECB with ample room to justify its loose monetary policy
stance. We expect the ECB to send a dovish signal, stressing the
downside risks to the economic outlook and reconfirming the ECB’s
willingness to do more if needed. In the absence of any new policy
measures, most attention at the press conference will very likely be on
the recent war of words, with many German observers, so-called experts
and politicians having started a new round of verbal attacks on the ECB
and its current monetary policy stance. In our view, the ECB will try to
keep a very matter-of-fact tone in this debate but will remain very
tough on the content, probably referring to Article 130 of the Treaties,
which is very clear on the ECB’s independence. The only tangible from
today’s ECB meeting should be details on the corporate bond-buying
programme. However, given the recent war of words from Germany against
the ECB, the press conference should be anything but boring. Expect an
ECB meeting that is light on action but heavy on words.
MUFG
After
the ECB announced a comprehensive package of new easing measures at
their last meeting, it is likely that today’s meeting will be just a
holding operation as the ECB continues to assess the initial impact from
the new easing announcements. It is likely that President Draghi will
continue to talk up the potential effectiveness of their new easing
measures to help support the euro-zone economy and return inflation back
towards their target. President Draghi may even take a more defensive
tone following recent criticism of the ECB’s easing measures by German
politicians. He is likely to reiterate that the ECB would implement
further easing measures if required although emphasize that the ECB does
not judge it necessary at present. The ECB signalled at their last
meeting that they are less in favour now of lowering rates further into
negative territory although did not completely rule it out. It prompted
euro-zone short rates and the euro to rise following their last
meeting. Short rates have since partially reversed the move higher. We
expect President Draghi to reiterate the same negative rate message but
it should have less impact today.
Danske Bank
We
expect a dovish tone from Draghi at the ECB meeting this week, but no
new measures. Despite the comprehensive package of easing, which was
announced in March, the ECB is still under pressure to ease again as
inflation expectations remain around a historically low level, while the
effective euro has strengthened following the easing from the ECB. We
believe Draghi will re-open the door for additional rate cuts after
stating at the latest meeting in March that he did not anticipate more
rate cuts. Draghi is likely to do this by emphasising the ECB’s forward
guidance stating that policy rates are expected to ‘remain at present or
lower levels for an extended period of time’. A renewed focus on
cutting policy rates should not be a big market surprise, as the ECB
minutes revealed that ‘the Governing Council would not rule out future
cuts in policy rates, as new shocks could change the outlook for
inflation’. Generally, market expectations ahead of this ECB meeting are
not very high, but looking further ahead additional rate cuts are
priced in with a probability around 50% in September. Further details
about the TLTRO II loans will also be in focus. In particular, more
information about the lending benchmark, which determines whether the
lending rate will be positive or negative, will attract attention.
TDS
The
ECB is unlikely to offer any major policy changes at its meeting so we
see a rather boring meeting with EURUSD more likely to eke slightly
higher through the meeting. They’ll reiterate that they remain ready to
act if inflation expectations become further de-anchored, and will
reassure that much of the impact on the economy from past easing remains
to be felt, but the focus will be on them already busy implementing the
decision from March rather than any need to innovate further now. The
only small risks are that we get further details on the IG credit
purchases planned to begin later in Q2 (EUR+) or more discussion from
Draghi on how far out any idea of tightening might be or how tolerant
they may be eventually of upside inflation.
Investec
In
Europe, the ECB Governing Council meets on monetary policy and there is
little chance of a change in policy. It seems far too early to judge
the impact from the most recent easing measures, but Draghi will likely
point to the improvement in credit conditions post decision, although he
will likely have to field a barrage of questions on why the Euro has
appreciated since its last announcement.
BBH
It
is unreasonable to expect the ECB to take fresh policy initiatives.
Last month it announced several new measures, and all of them have not
been implemented. Details on the corporate bond purchases and, possibly
the new TLTROs, are expected. Given size and liquidity considerations
of the corporate bond market and individual issues, most estimates
appear to gravitate around 10-15 bln euros of corporate bond purchases a
month. We expect Draghi to offer a robust defense of ECB's actions. He
will point to some positive developments due to the central bank's
policy initiatives. Draghi will suggest that the critics do not have a
more compelling strategy to reach the mandated inflation target. Doing
nothing is not an option.