Although inflation in the eurozone is not even half that of the US, central bank debate is the same on both sides of the Atlantic – when bond purchase rates should slow.
As with the Federal Reserve, most expect any tapering decision to wait a few months from the European Central Bank. The ECB’s decision on the pandemic emergency purchase programme, which was used to buy €80.7 billion worth of bonds in May, is a detail that traders will focus on when announcing an interest rate decision at 1:45 pm Central European time ( 7:45 am) on Thursday. ECB President Christine Lagarde holds a 8:30 a.m. Eastern press conference when US consumer-price data will be released.
Morgan Stanley economists led by Jacob Neal say the ECB will maintain the current buying momentum. The financial situation has become dire, as yields not only on German dams
grew but spread to the fixed income securities of peripheral countries such as Italy
widened. With the EU now issuing bonds to fund the Next Generation Recovery Fund, the ECB’s easing of a decision will only make the situation more dire.
The EU COVID-19 vaccination programme, Morgan Stanley economists say, is still less than half of the target, and money from the EU recovery fund has still not been pulled out. At the current rate, the full €1.85 trillion of PEPP capacity will be exhausted in February.
Economists at Credit Suisse, led by Neville Hill, by contrast, elucidate a more contradictory case that the ECB will reduce the monthly buying rate on PEPP to €60 billion, although the bank still hopes that the full program is used. Will go The PEPP, they note, was not created to bring up core inflation, but to prevent it from falling further – which is what has happened. With the improvement in key economic indicators, they expect the ECB to “reduce its lease on the bond market.”
“Either way,” add Deutsche Bank economists led by Mark Wall, “we expect the ECB to argue in June that the appropriate pace of purchase is an operational decision, not a strategic decision to keep or exit PEPP.” is.” Deutsche Bank is forecast to maintain the current bond purchase rate, which they refer to as a “close call”.
Stoxx Europe 600
In dollar terms, the stock-market index has outperformed the US S&P 500. performed slightly better than
With a growth of 14% in 2021. euro
The dollar has remained stable vs.
Here’s what analysts at other firms have to say:
Berenberg: “Beyond a decision on the projected pace of asset purchases over the next three months, markets should see this Thursday whether the ECB: indicates it will use the inbuilt flexibility of its flagship buying program to slow the pace over the summer.” At short notice, or without notice, in response to growth and inflation, provides clear clues as to what to look for in financing conditions or economic data to begin tapering in September, and/or 1.4 Raises its 2023 employee estimate for headline inflation from 3% to more than 1.5% (unlikely).
Evercore: “We expect only minimal changes to ECB staff estimates, and we think Lagarde will emphasize the ECB’s intent to see a near-term bounce in inflation given weak underlying inflation dynamics.”
Nomura: “We expect the ECB to revise its 2021 inflation forecast substantially, but to show the medium-term inflation forecast to be well below target. With rising sovereign bond yields, the ECB’s comments at this meeting are justified.” That should be enough to keep form.”
RBC Capital Markets: “While the economic data is improving, with the health crisis looming, the recovery is in its infancy and rising inflation is still seen by ECB officials as fleeting. In addition, a sell-off in the bond market and an appreciable euro remains a risk to the ECB’s pledge to maintain ‘favorable financing conditions’ and we think the ECB will not believe it is time to slow down the pace of buying. has arrived, a view also supported by recent changes in ECB communications.”
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