ECB Preview - The ECB will hold its press conference on Thursday March 7. Since the last policy meeting, data has continued to be weak even if more resilient lately (PMI), core inflation has not been picking up and political risk persists.
What can we expect from this meeting?
- Downgrading of growth and inflation forecasts: ECB 2019 and 2020 growth forecasts are still at 1.7%. However, we expect the ECB to revise those figures downwards to 1.4% in 2019 and 1.6% in 2020. This is widely expected by market participants and should not have significant impact. The ECB should also revise their headline inflation forecast down to 1.5% vs 1.6% in 2019, and their core inflation forecast to 1.3% vs 1.4%.
- TLTRO: ECB speakers have been mentioning it for weeks now, including Mr. Coeuré. We think it is too soon for the ECB to announce a TLTRO but they should at least acknowledge the fact that it is an option and that more details could be communicated later on. A formal announcement could be made in April.
- Forward guidance: There has been some market speculation that the ECB could extend how long it expects rates to stay unchanged, from “through the summer” to late 2019. However, we do not think this will be the case; forward guidance should remain unchanged.
We do not expect this ECB meeting to have major consequences on financial markets.
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