Thursday will be the key day to understand the general address of the monetary policy european in the fourth quarter of 2021. Il meeting of the ECB is the key event marked in red on the calendar, in which it could be decided to opt for a slight slowdown in the purchases foreseen by the Pepp (Pandemic emergency purchase program) and trace the future trend of taxi. In any case, according to the analysis of market experts, Frankfurt should lean towards moderate solutions. Well aware of the pandemic threat always lurking and of an economic recovery still to be consolidated in the Eurozone.
The braking of the Pepp
The next September 9 the ECB will announce his decisions of monetary policy and will publish the forecasts economic. Some interventions of the past few days have affected what can be expected from this meeting. The growth and inflation forecasts will be revised upwards for 2021, although the ECB will continue to overlook inflation. One of the most important moves could involve Pepp, according to the analysis of three major players in the financial sector such as Allianz Global Investors, Morgan Stanley and T. Rowe Price.
The forecasts of the experts
According to the searches made recently on the subject, based on the statements of the policy maker, the chances that a reduction in the pace of purchases of the Pepp I’m above 60%. It therefore appears likely that Frankfurt will announce a reduction in the volume of purchases within the Pepp and a return to the pace previously held, before the acceleration announced in March. In any case, the ECB sees the program as an insurance against the risk of downside, so the Pepp will continue as long as the pandemic is in place.
The battle over rates
Another hot topic, then, is the interest rate policy. The meeting will be the occasion for the ECB to clarify his strategy in a context of awakening the “hawks”. On this occasion, the new monetary policy framework announced in July will be explained, including its early guidance on rate hikes – which was not unanimously supported – and the tools to be implemented to achieve its inflation target.
QE towards a new wording
The reports of theultimo meeting, that of July, suggested that the ECB would have separated the forward guidance on taxi of interest from that on THAT. The current guidance on the asset purchase program (APP) predicts that it will end shortly before key ECB interest rates begin to raise. From reports from the July Governing Council meeting, it appears that several members were concerned about the implications that forward rate guidance could have for QE. They feared that the current wording implied that the duration of QE would coincide with that of low interest rates, as it actually is. Therefore the topic of forward guidance on QE in the next meeting. For this Thursday we could see a change in the wording on QE.
In short, thewaiting for the markets it is feverish, also because the current financial conditions in Europe are much more favorable than the last meeting of the ECB. The word then passes to the Eurotower, which will certainly act with balance and moderation also in this circumstance, especially in view of the possible risks of a Covid tail blow in the long winter months. Because even an impact on countries like the United States or China would end up reflecting on the economy of the Old Continent. An eventuality not to be underestimated.