ECB: No new TLTROs and no formal changes to forward guidance – TDS

Analysts at TD Securities are looking for a relatively unchanged message from the ECB on Thursday and suggest that the policy statement is likely to remain  unchanged, and they are not anticipating TLTROs, and risks around growth are likely to remain tilted to the downside.

Key Quotes

“The ECB releases the quarterly update of its macroeconomic projections. We expect a sharp downward revision to the growth forecast, with 2019 growth revised down from 1.7% to 1.3%, which would be the biggest single-meeting downgrade to growth since 2012.”

“Turning to inflation, oil prices are about 8% weaker across the forecast horizon, while the EUR remains unchanged. We expect the pass-through from lower oil prices, coupled with some further degree of slack on account of weaker demand growth, to lead to a downward revision in headline inflation: we expect inflation to be revised down by 0.2ppt in 2019 to 1.4% (also in line with European Commission estimates), and 0.1ppt lower in 2020 and 2021.”

“From a strictly theoretical standpoint, the ECB should downgrade the new projections enough to re-center them and ensure the risks are balanced. But we don’t expect the balance of risks to be “upgraded” in this sense (even on a large growth downgrade), largely because the risks mainly represent external, binary factors that are hard to model.”