ECB meeting: Draghi to keep policy parameters unchanged

Today, all eyes will be on the ECB... Although there has been speculation that the ECB - having just entered the second month of its Public Sector Purchase Program – could already move the goal posts, we deem this unlikely, although small ‘technical’ tweaks cannot be entirely excluded.

More likely, however, is that the ECB will leave it up to the market for now. After all, if the ECB believes that its policy measures will be successful in lifting growth and inflation in the medium term, this should ultimately be reflected in interest rate expectations. There is no use in trying to force this, in fact that could be counterproductive given the still fragile state of affairs.

As such we expect ECB President Draghi to stay close to the story line set out in recent speeches. This means that we expect him to underscore that although the economy is on a recovery path, downside risks have not entirely disappeared.

Draghi will probably express the view that recent decisions by the ECB have helped confronting the risks of too prolonged period of low inflation, but that the Council does not see a need to change the monetary policy parameters at this stage. Rather, the focus will be on the decisive implementation of its measures.