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Change in assessment will not fit the big picture message, according to Nick Kounis, Head of Financial Markets Research at ABN AMRO.

Key Quotes

“Bloomberg News reported yesterday some leaks about the ECB’s upcoming projections and risk assessment. The ‘officials familiar with the latest projections’ said that the forecasts for economic growth had been cut slightly starting this year. This reflected weaker global demand.”

“At the same time, projections for inflation would be largely unchanged. None of this is particularly surprising or controversial. More interesting was the report that the ECB committee that oversees the compilation of the forecasts now sees the risks to economic growth as being tilted to the downside.”

“The ECB Governing Council has communicated up until now that the risks to the economic outlook are balanced despite only mentioning a list of downside risks and no upside risks to the outlook.”

“In our view the risks to the economic outlook have been skewed to the downside for some time. So will the Governing Council take the committee’s advice and proclaim the risks to the downside following Thursday’s meeting? We doubt it.”

“Since the last Governing Council meeting the risk spectrum has probably not changed sufficiently for that. More importantly, we think the Council will be mindful of the message that would send.”

“In June, the ECB signalled a very slow exit from super accommodative monetary policy, with net asset purchases ending this year and interest rates not rising until late next year. This message has been largely digested and priced in by financial markets.”

“We doubt the ECB wants to give the impression at this stage that it is heading for an even slower exit. So we think the risk assessment will remain balanced for now.”

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