FXStreet (Córdoba) – According to analyst from Global Markets Research at Nomura the risk of further action by the European Central Bank (ECB), as early as Thursday, has clearly increase in the light of recent developments.
Key Quotes
“Although a change to QE at the next meeting is not our baseline, the risk of ECB President Draghi delivering a birthday surprise on 3 September is elevated in our view”.
“Chief economist Peter Praet (26 August) highlighted that downside risks have increased and there should be “no ambiguity on the willingness and ability of the Governing Council to act if needed”, suggesting a decision whether to adjust the PSPP will likely be a close call.”
“In our baseline of no-policy action, we expect the ECB’s dovish rhetoric and threat level to remain elevated, firmly underlining that the Council stands ready to act and change its monetary policy stance if the medium-term outlook is materially challenged. The ECB will also likely stress that QE is open-ended and could extend beyond September 2016 if required to achieve the desired sustained adjustment in the inflation path.”
“We expect the ECB staff to revise down its inflation projections to 0.1% in 2015 (risk of 0.0%, from 0.3%) and to 1.4% for 2016 (from 1.5%), reflecting lower oil prices. However, we expect the 2017 inflation projection to be unrevised at 1.8% (mainly owing to a steeper oil futures curve). We expect the GDP growth projection for this year to be unrevised at 1.5% (risk of 1.4%), but revised slightly lower (by 0.1pp) to 1.8% in 2016 and 1.9% in 2017, on account of weaker global growth assumptions.
“Despite the agreement on the ESM programme, we think it is too early for the ECB to reinstate the collateral waiver for Greece ahead of the new election.”
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