The ECB will hold its quarterly monetary policy meeting on July 22nd.

20 July 2021

This content is for professional investors only as defined by the MiFID.

Please find below what we expect:

  • We expect the ECB to redefine its forward guidance to align it with the strategic review.
  • We expect this new forward guidance to sway towards a more accommodative monetary stance, taking into account the new 2% inflation target (vs « close but below 2% ») and the fact that they will tolerate inflation moderately above 2%.
  • We expect the ECB to insist on the need to have a « forceful and persistent » answer when rates are at the lower bound.
  • We expect the introductory statement to evolve towards a « more narrative-based and more concise monetary policy statement ».
  • We do not expect to have clarification about the end of the Pandemic Emergency Purchase Programme (PEPP) and the potential increase of the Asset Purchase Programme (APP) following March 2022. Those decisions will be left for the September meeting or the ECB forum in Sintra (September 28-29th).
  • We expect the ECB to probably maintain a cautious tone on the economic front, due to concerns about the delta variant of COVID-19. 

All in all, we expect the ECB to adopt a dovish stance, but market reaction could be relatively limited considering they have already priced it in.

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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