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ECB: We count on a pointy downward revision to the expansion forecast – TD Securities

“We search for a comparatively unchanged message from the ECB on Thursday: the coverage assertion is more likely to remained unchanged, we do not anticipate TLTROs, and dangers round progress are more likely to stay tilted to the draw back,” argue TD Securities analysts previewing subsequent week’s ECB assembly.

Key quotes

“The ECB releases the quarterly replace of its macroeconomic projections. We count on a pointy downward revision to the expansion forecast, with 2019 progress revised down from 1.7% to 1.3%, which might be the largest single-meeting downgrade to progress since 2012. A lot of this, nonetheless, is marking to market on the again of weak 2018This autumn progress information, in addition to an assumption of weak 19Q1 progress information and assumes little change to the remainder of 2019 quarterly dynamics.”

 “From a strictly theoretical standpoint, the ECB ought to downgrade the brand new projections sufficient to re-center them and make sure the dangers are balanced. However we do not count on the steadiness of dangers to be “upgraded” on this sense (even on a big progress downgrade), largely as a result of the dangers primarily characterize exterior, binary elements which are laborious to mannequin.”

“We count on the Governing Council to take care of its ahead steering of charges on maintain till “not less than by way of the summer time of 2019″ and lengthy sufficient to make sure inflation converges on track. Formal adjustments to ahead steering are unlikely at this assembly, in our view, because the Governing Council needs to see the anticipated rebound in exercise first.”

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