18 Feb 2016
ECB’s January Accounts: Focus on easing and core Inflation - SocGen
Research Team at Societe Generale, notes that the press conference following the ECB’s January meeting saw President Mario Draghi back at his best, providing forward guidance ahead of the March meeting and using strong language (“no limits to deploy instruments”).
Key Quotes
“The minutes will potentially show more nuance on how well anchored the promises of more actions were (Draghi said that the Governing Council had been unanimous in its commitment to this line of communication). Moreover, we are looking for further details on the reasoning around the downside risks to core inflation.
The ECB was already a bit high for this year, in our view (1.3% vs our 1.1%), and for 2017 (1.6% vs our 1.3%), so there is room to lower the core inflation forecasts in light of the external environment and lower oil prices. At the same time, new forecasts for 2018 are unlikely to show anything but a continued convergence towards the 2% target (whereas we expect headline inflation to drop slightly, while core should be stable).
As the current market uncertainties have moved on from China and oil since the January meeting, to European banks and the Fed, we are unlikely to find much detail on the Governing Council’s thinking on these specific factors.”
Key Quotes
“The minutes will potentially show more nuance on how well anchored the promises of more actions were (Draghi said that the Governing Council had been unanimous in its commitment to this line of communication). Moreover, we are looking for further details on the reasoning around the downside risks to core inflation.
The ECB was already a bit high for this year, in our view (1.3% vs our 1.1%), and for 2017 (1.6% vs our 1.3%), so there is room to lower the core inflation forecasts in light of the external environment and lower oil prices. At the same time, new forecasts for 2018 are unlikely to show anything but a continued convergence towards the 2% target (whereas we expect headline inflation to drop slightly, while core should be stable).
As the current market uncertainties have moved on from China and oil since the January meeting, to European banks and the Fed, we are unlikely to find much detail on the Governing Council’s thinking on these specific factors.”