ECB Preview: Uneventful meeting amidst plenty of event risk? - Rabobank

Elwin de Groot, Senior Eurozone Strategist, suggests that they do not expect the ECB to change its policy stance today.

Key Quotes

“The ECB is unlikely to implement additional measures so long as there are still previous decisions pending full implementation – i.e. the first TLTRO-II allotment, due on 24 June, and the start of corporate bond purchases (CSPP). This was, broadly speaking, also the message conveyed in the minutes of the 20-21 April meeting.

Press conference may well be an uneventful meeting, there is still plenty of event risk ahead. This by itself should be sufficient for the ECB to maintain a ‘dovish’ stance. Besides the release of the lastest ECB staff projections for growth and inflation, key topics or questions that could pop up during the press conference, among others, are:

- The upcoming EU referendum in the UK and to what extent the ECB has prepared for the possible fall-out from a ‘Brexit’ vote (note that the first TLTRO-II is allotted on t+1)

- The recent stickiness in long-term inflation break-evens (5y/y5 forward) amidst rising commodity prices and falling volatility (i.e. lower liquidity risk premiums)

- In the wake of the deal between Greece and its creditors: the possible re-instatement of the ECB waiver to allow Greek banks to return to the regular ECB refinancing operations and, albeit less likely at this stage, the possible inclusion of Greek bonds in the PSPP

- The interpretation of the inflation target and whether a symmetrical view would require the ECB to allow inflation to run above 2% for some time in order to make up for past shortfalls.”