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#1 12-12-2018 11:19:56

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ECB: 4 points to watch out for during this week's meeting (ABN AMRO)

ECB: 4 points to watch out for during this week's meeting (ABN AMRO)

Analysts at ABN AMRO believe that the tone of the ECB and the forward-looking outlook will change significantly over the next few months, but that this will probably only happen in stages, with the meeting this week being a first step.

"At the next meeting, we are awaiting the following:

1- Moderate reductions in economic growth and inflation forecasts. The ECB seems to stick to its basic argument for the economy and attributes much of its weakness to temporary factors. In addition, in a recent comment, ECB officials seem to have clung to the idea that underlying inflationary pressures will accumulate significantly. We believe, however, that larger declines are possible in the first half of next year, as the economic data clearly show that there is a more fundamental downturn in the export-related train.

2- Unchanged guidelines regarding key interest rates. In line with the view that the ECB will largely stick to its basic argument for the economic outlook, it will probably not change its guidance on key interest rates this week. We expect the forecast to change by June 2019.

3- End of net purchases but clearer indications of reinvestments. We expect the ECB will almost certainly announce that it will end net asset purchases this month. Since purchases for a number of countries are limited by emission limits, they can't continue under any circumstances. However, it can provide more information on its reinvestment policies. For example, this may involve a longer period of reinvestments, indicating that they will continue "well beyond" the period of unchanged rates. In addition, this could give more flexibility to reinvest in a longer period of time than the next two months, as is currently the case.

4- No announcements on TLTROs for the time being. We don't believe that the ECB is ready to announce changes to the TLTRO programmes. The discussions seem to be still at an early stage. We expect that the changes made to the TLTRO programme in March will allow banks to repay the funds over a longer period of time than is currently the case.

"Anything worth having is worth going for - all the way." - J.R. Ewing



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