The ECB should reiterate that “Fiscal policy” is the answer!

20 January 2021

The ECB will hold its press conference on January 21st.

Expectations are very low following December announcements (Pandemic Emergency Purchase Programme - PEPP size increase, new Targeted longer-term refinancing operations - TLTRO terms…), therefore do not expect too much from this event:

  • Mrs. Lagarde will likely keep a very accommodative tone but will not discuss changing the ECB’s monetary policy tools.
  • The recent fall of the Euro vs the US dollar lowers the pressure on the ECB to comment the exchange rate movements. Still, after last year’s appreciation of the Euro, they may reiterate that they will “continue to monitor developments in the exchange rate”.
  • The ECB will most likely not comment on the political “noise” in the Netherlands, Germany or Italy (especially not in Italy).
  • Additionally, the ECB will likely reaffirm that fiscal policy must be the main response to the current economic situation.

Overall, we do not expect any meaningful market reaction from this ECB meeting.


Disclaimer

This commentary is intended for non-professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

 

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