”This is not a tapering!”
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During its September 9 press conference, the European Central Bank (ECB) is expected to address two major topics: new macro-economic projections and an update on the pandemic emergency purchase program (PEPP).
On the economic front, we expect the ECB to maintain an optimistic tone given the progress on the European vaccination campaign, despite slowdowns in China and the USA. But the central bank will emphasize that uncertainties related to COVID-19 remain. We expect new macro-economic projections to show improved growth in 2021 (4.8% vs 4.6% in June) and higher inflation across the board but especially in 2021 (2.2% vs 1.9% in June).
We expect the ECB to reduce the pace of the PEPP (from €80bn to €70bn a month) consistent with the improving economic outlook and its will to consume the PEPP envelop in full. We do not expect the Governing Council to make any announcement concerning the future of the pandemic emergency and the asset purchase programs following the PEPP’s expected end in March 2022. In our opinion, the ECB will maintain very proactive and accommodative communication on their future monetary support.
Recent positive inflation surprises, even if temporary (yet to be confirmed), put some pressure on the ECB. Communicating about a reduction in the pace of the current Quantitative Easing program while keeping a very accommodative tone will not be an easy task for ECB President Lagarde, especially with a higher growth forecast.
We expect some volatility following this press conference, with moderately higher rates.
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.