Analysts at Rabobank believe that it became very clear that the ECB is actively preparing for the risks to the outlook and new asset purchases cannot be ruled out either if risks materialise.
Key quotes
“Although the inflation projection for 2021 was kept unchanged, Mr. Draghi underscored the importance of this ‘miss’ of its medium-term objective by noting that a granular discussion about the GC’s policy options also included a discussion about the symmetry of the ECB’s inflation target. The emphasis on symmetry only puts this 1.6% further away from their goal.”
“Yet reality is also sinking in with the Governing Council. And despite the market’s disappointment with today’s policy decision, we believe that Draghi signalled that the ECB is getting ready to deploy more easing if this is necessary.”
“Either way, the ECB’s preparations for eventualities raises the question of what eventualities could spur the Governing Council into action. A sharp rise in the euro, caused by Fed cut(s) for example, might force the ECB to cut the depo rate. So if the Fed opts for an insurance cut in the second half of this year, the ECB may have to follow.”
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