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Pre ECB Commentary

11 September 2018

The ECB will hold its press conference this Thursday and update its macroeconomic projections.

  • Growth forecast should not change significantly as 2018 and 2019 figures are broadly in line with market consensus. If there is a change, it should be of reference to a minor downward revision as macroeconomic momentum has decelerated over the last 3 months but we think Draghi will want to keep an optimistic bias.
  • Forecasting changes at the ECB on inflation is more tricky. We see good reason to revise headline inflation downwards vs June with Euro up on a trade weighted basis and commodities (ex oil) down. Core inflation numbers are also overly optimistic (ECB forecasts: 1.6% in 2019 and 1.9% in 2020). However, we doubt the ECB will incorporate those changes this week; it might more convenient to do it in December when QE ends.

It is unlikely that the ECB will change its forward guidance given the scheduled QE reduction in October and the end of QE in December. Keep in mind, Mr Draghi said he was happy with a first rate hike priced during Q4 2019 so we do not foresee any changes on this front. 
We do not expect new information concerning the reinvestment program (scarcity / maturity / flexibility), leaving this topic for December.
All in all, no material change expected, but risks are on the dovish side.

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