The meeting of the Governing Council of the European Central Bank (ECB) is scheduled for tomorrow, Thursday 14 April, which will find several issues on the table to be resolved, first of all the surge in inflation and economic uncertainty in the wake of the conflict in course between Russia and Ukraine. Although the market is not expecting major political decisions, the press conference by Christine Lagarde, president of the ECB, will be followed closely to find insights into potential future moves.
“The next step in the ECB’s monetary policy will not be an increase in rates, but rather the conclusion of the net bond purchases program; obviously, there is too little time for this to occur during Thursday’s meeting. The ECB has already specified the extent of the reduction of the bond purchase program by the end of the second quarter, without however providing any indication of the possible end of the program by the third quarter, a prerogative for the rate hike, “he says. Sylvain Broyer, EMEA chief economist at S&P Global Ratings, says there are three factors that will not ease this week and that will push the ECB not to make that decision.
“Specifically – explains the expert – it is a significant tightening of financing conditions after the last meeting, economic data that do not yet reflect the impact of the war in Ukraine on the economy, and, finally, growing doubts expressed by the members of the Board of Directors on the possibility that inflation will return below the target of 2% by 2024, as currently estimated by the bank’s staff “. According to Sylvain Broyer, the answers the board is looking for will come during the June meeting, including the new inflation forecast. Finally, letting the net bond buying program continue for another month could help curb the surge in long-term yields.