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.
“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.”