According to Tuuli Koivu, analyst at Nordea Markets, the ECB minutes continued to prepare a ground for further easing, but Coeuré has played down the role of market-based inflation expectations which supports the view that they will not hurry.
Key Quotes
“In the June meeting, the ECB both issued the terms for the TLTRO IIIs and lengthened the forward guidance through the first half of 2020. The minutes indicate that on both decisions, there was a wide support in the Governing Council.”
“The bias in the Governing Council seems to have been towards a more looser monetary policy than the decision indicate.”
“As Draghi mentioned in the press conference right after the meeting, there had also been discussion on the prospects of further rate cuts and restarting net asset purchases.”
“Thus, we continue to expect that in the current macroeconomic environment with a lot of uncertainty and inflation well below the target, the ECB will launch a new round of stimulus in September.”
“Also on 11 July, Benoît Coeuré gave a speech in which he illustrated the different developments of market-based and households’ inflation expectations recently.”
“According to Coeuré, a large part of the recent decline in the long-term market-based analysis is due to changes in the market risk premia and not much weaker views on inflation.”
“Coeuré’s analysis also point to a direction that the very low market-based inflation expectations are not solely a valid reason for the ECB to come up with a new round of easing already in the July meeting. Thus, we assume the ECB to launch a new round of stimulus only in September when the ECB will publish new macroeconomic projections.”
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