Markets

ECB expected to keep taps open as economic outlook uncertain

ECB expected to keep taps open as economic outlook uncertain

The announcement is due at 7.45 am ET on Thursday in Tallinn and Draghi is scheduled to hold his customary post-decision press conference at 8.30 am ET.

"Of the ECB's trio of monetary accommodation - QE, negative interest rates and forward guidance - the only likely change is to the guidance".

However, A large amount of spectators envisage that the bank's €60-billion recurrent bond acquisitions will linger and interest rates will endure at momentous slumps. The size was reduced in March from Euro 80 billion.

What that would mean in practice is that the council would say the risks to growth are now "broadly balanced", instead of tilted towards the downside.

These changes appear to be relatively modest, however, tinkering with the wording of the opening statement would be the first step to preparing for a bigger shift in European Central Bank policy such as tapering the Asset Purchase Programme or even stopping it altogether.

However, this air of optimism has been punctured by suggestions inflation forecasts are to be downgraded.

That is now predicted to average 1.5% this year, before falling to 1.3% in 2018 and 1.6% in 2019.

The euro was steady against the dollar, not far below a seven-month high of $1.1285 hit earlier this month.

The latest European Central Bank staff macroeconomic projections for the euro area were released in March.




The ECB, which targets inflation "below, but close to 2 percent" has maintained that the recent upward trend in inflation was unconvincing.

The ECB left its aggressive stimulus unchanged on Thursday, including its 2.3 trillion euro ($2.6 trillion) bond-buying program and sub-zero interest rates, despite resistance from cash-rich Germany.

Policymakers are expected to predict inflation will be at a sluggish 1.5 per cent over the next three years.

Euro zone stocks.STOXXE were down 0.1 percent.

Underlying inflation has largely been stagnant thus far this year, except for a blip in April that was caused by a late Easter.

The ECB rate-setting meeting is scheduled for Thursday, June 8, and investors are anticipating a change of stance from the ECB.

Draghi is unlikely to yield to such demands given the uncertain inflation path and better-than-expected growth, economists said. Our view on the Eurozone yield curve is essentially a belief that the European Central Bank will play catch up with the Fed in the next year, while the Fed may take a prolonged pause on its rate hiking cycle after its expected June rate hike.

An easing jobless rate suggests the sustained strong momentum in the labor market and is an encouraging sign for a rebound in wage pressures. Political controversies surrounding the US President raise concerns among investors as they may delay passing legislation on Trump's growth agenda.

Eurostat, the European Union's statistics agency, said Thursday that economic growth across the region was a quarterly 0.6 percent in the January to March period, 0.1 percentage point up on the previous estimate.


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