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22 Apr 2016
ECB: base line view - Nomura
In respect of Thursday's ECB announcements, analysts at Nomura explained that in our view (and in contrast to March), there was a more deliberate emphasis on keeping the door open to the potential for further interest rate cuts (more consistent with the forward guidance that rates are expected to remain at “present or lower levels” for an extended period of time).
Key Quotes:
The Statement emphasised the need to preserve an appropriate degree of monetary accommodation for as long as needed, and “if warranted to achieve its objective, [the Governing Council] will act by using all the instruments available within its mandate”
"Discussion on the economic outlook remains mixed, as economic recovery is expected to continue but overall growth risks remain tilted to the downside. The ECB believes inflation could turn negative again in the coming months (we currently track -0.1% y-o-y for April) before picking up in the second half of 2016 and recovering further in 2017 and 2018.
"Our baseline view is unchanged that the Governing Council is unlikely to rush into further easing anytime soon (barring a major shock), as the effectiveness of the recent policy response (in terms of its ability to raise core inflation in the region) takes time to evaluate. We continue to forecast a slower core inflation recovery, given weak wage growth and economic slack, and we still believe the ECB will have to do more later this year."
Key Quotes:
The Statement emphasised the need to preserve an appropriate degree of monetary accommodation for as long as needed, and “if warranted to achieve its objective, [the Governing Council] will act by using all the instruments available within its mandate”
"Discussion on the economic outlook remains mixed, as economic recovery is expected to continue but overall growth risks remain tilted to the downside. The ECB believes inflation could turn negative again in the coming months (we currently track -0.1% y-o-y for April) before picking up in the second half of 2016 and recovering further in 2017 and 2018.
"Our baseline view is unchanged that the Governing Council is unlikely to rush into further easing anytime soon (barring a major shock), as the effectiveness of the recent policy response (in terms of its ability to raise core inflation in the region) takes time to evaluate. We continue to forecast a slower core inflation recovery, given weak wage growth and economic slack, and we still believe the ECB will have to do more later this year."