Governing Council of the ECB: Monetary Policy

My teams’ predictions ahead of the ECB’s meeting on 8 March 2018

Brian Coulton, Chief Economist, Fitch Ratings
“We expect the process of normalisation to begin at this week’s meeting, albeit in baby steps. Strong growth momentum in the Euro area and greater confidence by the ECB that underlying inflation will indeed pick up over the forecast horizon, will necessitate modest changes to its language. In particular, its commitment to ‘increase asset purchases in terms of size and/or duration’ if needed, sits at odds with current buoyant conditions.”
Robert Sierra, Director, Economics
“We suspect the ECB will remain data dependent for the time being, especially on core inflation trends, but the stall for a more decisive shift in its monetary policy stance will likely be set out this week. Recent comments made by influential member Benoît Cœuré that the end of asset purchases will not lead to “an unwarranted decompression of the term premium” are significant. Cœuré reasons that the monthly flow of purchases consistent with holding down long-term interest rates will likely fall over time as the stock of QE increases and the share of government bonds still held by the market falls. As this happens the ECB can shift the focus of policy communication towards forward guidance on policy interest rates as the primary means of influencing longer-term interest rates.”