In view of Nick Kounis, head of financial markets research at ABN AMRO, ECB has finally came to terms with the deteriorating economic outlook as the Governing Council unanimously decided that the risks surrounding the euro area growth outlook have moved to the downside.
Key Quotes
“ECB now notes that ‘incoming data have continued to be weaker than expected as a result of a slowdown in external demand compounded by some country and sector-specific factors. While the impact of some of these factors is expected to fade, the near-term growth momentum is likely to be weaker than previously anticipated’.”
“ECB President Draghi noted that the discussion at this meeting was entirely focused on making an assessment of the outlook and that the policy implications were not discussed. Although the Council was unanimous in seeing downside risks, Mr Draghi suggested it was split in its assessment of the longevity and degree of the slowdown. At the same time, there seemed to be a consensus that the risk of recession was low. Further assessments of the outlook and the policy implications would follow at the March meeting.”
“The ECB did not give a clear signal on an extension of current TLTROs or a new round of the long-term funding programme for banks. However, he left open the possibility.”
“We expect to see further downgrades to the central bank’s economic growth and inflation projections in its next economic update in March. Meanwhile, our base case is that the ECB will announce an extension of its TLTRO programme.”
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