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Trader, analyst and instructor with a 6-year experience

ECB November meeting: what to expect?

By Kira Iukhtenko, FBS

Market attention on Thursday will be glued to the European Central Bank policy announcement at 12:45 GMT and to the press-conference that follows at 13:30 GMT.

Interest rates are widely expected to stay at a record low of 0.05% after the latest cut in September. Mario Draghi’s press-conference could bring more volatility to the markets. According to a Bloomberg article, the financial world is now worried by 5 major questions about the ECB policy:

  1. Is there more easing to come?
  2. If yes, how much will the ECB extend its balance sheet?
  3. Is there a conflict in the Governing Council?
  4. What is the outlook for inflation in the euro area?
  5. What’s next for Europe’s banks?

Comments on these issues will be closely watched and fiercely traded.

According to our forecasts, Mario Draghi will likely sound more dovish at this meeting, despite the fact that opposition to his easing policies is growing. However, we don’t expect the ECB to announce new easing measures in November. The regulator will first try to appraise the outcome of the current easing measures: TLTRO program and asset purchases. The bank has already bought 4.8 billion euros of covered bonds in the first two weeks of a purchase program. It is set to broaden with the ABS buying in November.

Are the current measures enough to inflate the ECB’s balance sheet by the targeted amount of 1 trillion euros? Worrisome economic data from Europe and aggressive monetary stimulus by the Bank of Japan put pressure on the regulator to do more. According to the most recent Bloomberg survey, more than 50% of the economists forecast the ECB to launch a large-scale sovereign bond purchases program in the coming months. In this sense the December meeting could be a more fruitful event. 

 

EUR
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