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Eurozone: Accounting for ECB easing - BNPP

FXStreet (Delhi) – Research Team at BNP Paribas, suggests that on Thursday 19th, the ECB is scheduled to release the account of its policy meeting on 21-22 October and expect the overall tone of the meeting account to be exceptionally dovish.

Key Quotes

“Particularly prominent in the statement were references to the slower-than-desired progress of HICP inflation back towards the ‘below but close to 2%’ medium-term objective and a need to re-examine the degree of policy accommodation in December, in tandem with the review of the staff macroeconomic projections. These issues should also feature prominently in the account of October’s meeting, reinforcing expectations of an announcement of additional policy action following the next meeting on 2-3 December.”

“Given plentiful speculation recently about the specific form such easing would take, the account of October’s meeting will obviously be scrutinised for any clues. One major difference compared with the account of the prior meeting in September will be the increased airplay given to a lower rate on the deposit facility.”

“The meeting account should presumably include some discussion on the pros and cons of an even lower deposit rate and where the lower bound might ultimately be, though we doubt that it will provide any explicit indications on the latter matter.”

“As for potential modifications to the asset-purchase programme, it seems from recently reported comments from unnamed ECB sources that there are numerous permutations currently under consideration. As these discussions are a work in progress, the account will again probably fall short of providing detailed guidance on the ECB’s preferences.”

“It may, though, offer some hints on various related issues, including the interplay between extending the reference date for the programme beyond September 2016 and increasing the monthly run-rate from EUR 60bn, plus the mix of assets that could be eligible for inclusion. Another area of interest will be whether the account reveals any dissent from the more hawkish members of the Governing Council and, if so, how widespread any opposition to further policy easing is.”

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