This week the European Central Bank (ECB) probably will not make any statements about the quantitative easing program (QE) and instead, given the strengthening of the Euro, decides to shift expectations of future developments for October. This is stated in the CNBC article.
ECB President Mario Draghi during his last press conference after a meeting of the ECB said that the governing Council will discuss the future of the QE program “in the autumn”. These words provoked speculation that Draghi will talk about the details of stimulus tapering in September. However, market participants are probably ahead of the event, because technically autumn starts in the end of September.
“A stronger Euro may lead to strong discussions that the ECB may postpone the onset of autumn to the period of Indian summer in late October, says chief economist for Germany and Austria, ING Diba, Carsten Brzeski. In any case, the main question for the ECB meeting (scheduled for Thursday) – will Draghi to shed some light on the game plan of the ECB to curtail”.
For the period since the previous ECB meeting in July, the Euro strengthened by 2.4% against the U.S. dollar, which caused a rise of concerns about the possible impact of strong Euro for the Eurozone’s recovery and prospects for inflation.
On Thursday, the ECB will release fresh forecasts for inflation and GDP growth in the Eurozone. Given the strengthening of the Euro, the inflation forecast may be adjusted downward, and this may affect the markets. According to analysts, the Euro increased by 4.2% since the publication of the June projections of the ECB, therefore, the forecast for head of inflation for 2018 may be revised downward by 0.2 percentage points to 1.1%.
Thus, in the course of tomorrow’s press conference, Mario Draghi will have to explain why, despite the inflation forecasts, the ECB thinks he’s right, turning off the QE program.
The results of the Reuters poll of 66 economists, the majority of respondents expects that the beginning of tapering the incentive program, the ECB will be announced in October and will fully complete the QE by the end of next year.