All eyes will be on the ECB today as it announces its latest policy decision, before President Mario Draghi faces the press to deliver his statement and answer questions.
The end of quantitative easing in December – or more accurately, balance sheet increases – was meant to mark the end of crisis period stimulus measures but unfortunately for the central bank, that has coincided with an economic slowdown, rising global protectionism and trade wars that pose a risk to the outlook.
You don’t have to look much further than this morning’s PMI data from the eurozone, Germany and France to see that the region is struggling. The data has been on a downward trajectory for the last year and with German manufacturing and French services slipping into contraction territory, talk of possible recession is only going to increase. Not an ideal time to be tightening monetary policy then.
With that in mind, the ECB is widely expected to push back expectations for its first post-crisis era rate hike, which was initially being eyed for the end of the summer. They may hold off on this today though, instead waiting until March when they have new economic projections on which to base it on. That’s not to say that Draghi won’t hint that such a move is likely, with the new projections likely being revised lower based on the numbers we’re already seeing.
There has also been suggestions of a new round of LTROs which Draghi will likely be asked about during the press conference. This will provide further relief for countries in the region, particularly in the periphery that are most exposed to a slowdown having still not recovered from the stress of the financial crisis and debt crisis that followed.