FXStreet (Guatemala) – Analysts at Bank of americaMerrill Lynch explained that they expect the focus of this week’s ECB meeting to be the new forecasts and whether Mario Draghi will echo other Governing Council members’ dovish statements recently.
Key Quotes:
“The two elements are closely intertwined. The inflation forecast is only just consistent with the ECB’s inflation target and even a limited downward revision would legitimately call for more easing. At this juncture, we feel it is too early for Draghi to join the “verbal intervention” camp, while we also think the central bank will unveil a new batch of forecasts that will be very close to the March version.”
In our view, the weak state of the global economy and the weak pass-through of the decline of the Euro to European inflation should be valid sources of concern for the ECB, but at the same time the return of the EUR/USD exchange rate to the safe range around 1.10 gives the central bank ample time to ponder the data flow and bet on a reacceleration in US economic activity in 2H15.”
“The safe course of action, against this background, is for Draghi to keep his powder dry and avoid elaborating too much on a continuation of QE after September 2016. This would call for keeping the forecasts almost unchanged from the March version.”
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