ECB Meeting is the Session's Highlight – BBH
Research Team at BBH, suggests that it is unreasonable to expect the ECB
to take fresh policy initiatives in today’s policy meet.
Key Quotes
“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.
At
last month's meeting, the euro was falling as Draghi announced the new
measures. But then he went on to say that with the 10 bp deposit rate
cut and the zero refi rate, that interest rates had reached their floor.
The euro rallied on the news and has not looked back, even though
Draghi and other ECB officials have downplayed that assessment. Draghi
is likely to reiterate that it will take whatever action is necessary
within its mandate to reach its legally mandated target.
Draghi
may implicitly or explicitly defend the ECB's independence from the
encroachment by politicians. In recent weeks, some German officials,
especially in the finance ministry, have been unusually critical of the
ECB. Even the Bundesbank's Weidmann, who has been critical of the
central bank's actions, defended it against the German politicians.
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.”
