Columbia Threadneedle: Comment on today´s ECB meeting

7 maart 2019

“In a world where central banks are keen to scale back expectations of tighter monetary policy, it will be no surprise if the ECB revises its staff projections to reflect the sluggish pace of domestic growth and the worsening global outlook.  The Euro Area recovery has been fragile for the past year, and while some of the weakness may be attributed to transitory factors, it’s likely that the run rate of growth is now much closer to trend than was previously expected.

We don’t expect concrete policy announcements, but the Bank may choose to tweak the language around the timing of its first rate hike, pushing the move out from Q3 towards the end of this year.  More significantly, Mario Draghi may use the cover of lower macroeconomic projections to provide details of plans for a further Targeted Long Term Repo Operation (TLTRO).  This is partly out of necessity: the previous operation begins to expire in Jun 2020, putting stable funding requirements under pressure for some Euro Area banks as soon as this summer.  But lower forecasts also provides an economic reason to bolster the monetary policy transmission mechanism by extending the TLTRO programme.”