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TLTRO is coming

05 March 2019

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.
 

This commentary is intended for 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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