ECB Preview: Increasingly evident that Euro Area growth is past its peak - Westpac

Westpac Analysts offer a brief preview of today’s European Central Bank (ECB) monetary policy decision due to be announced at 1145 GMT, which will be followed by Draghi’s press conference at 1230 GMT.

Key Quotes:

“Increasingly, it is becoming evident that Euro Area growth is past its peak.

The outlook for the ECB will depend heavily on the pace of slowing seen across the region. If inflation is to move towards trend, then above-trend growth must persist throughout the forecast period.

While not anticipating a collapse in growth by any means, we continue to believe that remaining slack in the Euro Area combined with a softening growth pace (from 1.25ppts above trend in 2017 to closer to 0.25ppts in 2019).

To our mind, this will not be enough to drive inflation to target but will see it move closer than it has been.

The consequence of the above outturn should be a slow end to asset purchases, extended to December, followed by an unwinding of negative interest rates in H1 2019, and an eventual rise in the refinance rate, in Q4 2019.

In the near term, the tone of language will be all that changes.”