ECB to Maintain Its Patient Stance - Danske
Pernille Bomholdt Henneberg, Senior Analyst at Danske Bank affirmed that they expect the European Central Bank (ECB) to maintain its patient stance on Thursday. Analysts from Danske still believe that the central bank will have to extend the massive purchase program.
“We expect the ECB to maintain its patient stance at the meeting this week and not send any new signals about more easing. An important argument for the ECB to remain patient is that financing conditions have improved following the easing measures announced at the beginning of March. The latest easing of financing conditions is seen in lower real swap rates due to higher near-term market-based inflation expectations.”
“The ECB will publish updated growth and inflation forecasts at the meeting this week. We look for an upward revision to the ECB’s projection for headline inflation in 2016-17 due to the higher oil and food prices, but the core inflation forecast will in our view be revised lower over the entire forecast horizon.”
“We stick to our view that the E CB will remain side-lined in the global currency war and not cut policy rates further.”
“We still believe that the ECB will have to extend its QE purchases beyond March 2017 as the ECB, in our view, will not see inflation at a sustainable path towards 2%. We do look for a considerable rise in inflation starting from June this year, but the main driver is the contribution from energy prices and no matter whether the oil price follows our forecast or performs in line with the forward market, the support will fade in Q2 17.”
“Focus is also likely to turn to the situation in Greece as the ECB may reinstate the waiver thereby accepting Greek bonds as collateral again.”