No room for surprises from the ECB in the foreseeable future – BTMU

European Head of GMR at BTMU Derek Halpenny noted the ECB should continue with its stance in the next months.

Key Quotes

“We were not surprised with Draghi’s speech to the European parliament yesterday and as we’ve argued before there is little chance of the ECB shifting its monetary bias ahead of key political elections that would only increase further the risks of financial market instability. The ECB is very mindful of the impact uncertainty can have on economic conditions and now is not the time to take risks”.

“While there may be an ulterior motive to maintain the current monetary bias, the logic economically is also strong. Draghi argued that it is too early to make conclusions on the upturn in inflation given the driver of that was transient energy price base-effects”.

“In an attempt to counter the fact that the ECB will reduce its pace of monthly purchases of sovereign bonds from EUR 80bn to EUR 60bn from April, Draghi again emphasised that if circumstances warranted, the ECB would increase the pace of purchases again. We expect Draghi and other ECB officials to emphasise this stance at least through to the French presidential elections in order to limit as much as possible the risks of financial market instability”.