Fxstreet (Delhi) – Analysts at Bank of America Merrill Lynch note that this week’s ECB meeting’s priority will be to avoid the more euro re-appreciation is the short run as the the weak euro is QE’s most tangible result.
“Key Quotes”
“In our view “talking dovish”, i.e. unambiguously recognizing the risks to their outlook and underlining the possibility to do more, should be the ECB’s first port of call for this week, while the resilience in the real economy data flow and uncertainty over the Fed stance makes it hard to get into action in September.”
“In the medium run though, we believe the negative risk to consumer prices from the Chinarelated turmoil matters more than the adverse shock on growth.”
“The ensuing revision in the ECB’s inflation trajectory – with Praet already acknowledging downside risks there – might force the Governing Council’s hand on beefing up QE by the year-end, in line of our long-held view that the inflation outlook would force the ECB into “more for longer”.”
“In our view, announcing that QE will continue beyond September 2016 would be a powerful form of forward guidance, allowing it to maintain a suitable “policy gap” with the Fed.”
(Market News Provided by FXstreet)