La Française - PRE ECB Commentary

 by François Rimeu, Senior Strategist, La Française AM

No new measures, but a very dovish tone

The ECB will hold its press conference on March 11.The outcome could put the ECB’s credibility at risk.

The Governing Council will most likely maintain a very accommodative tone to preserve easy financing conditions and ensure that low rates are passed on to the real economy in order to support the recovery and the convergence of inflation across European countries towards the 2% objective.

We do not expect new measures.  We do not anticipate that the ECB will increase the PEPP (Pandemic Emergency Purchase Programme) envelope (EUR1850bn).

Mrs. Christine Lagarde is expected to communicate strongly on the ECB’s new mantra, namely “holistic and multi-faceted” approach to judging financial conditions. Despite the slowdown in PEPP purchases, she could signal action to battle the threat of a sharp rise in yields, with all options open. It is likely that she will also reaffirm the importance of the PEPP’s flexibility.

Furthermore, the central bank will update their macro-economic projections. We do not expected changes on growth (+3.9% in 2021, +4.2% in 2022). Headline inflation could be revised up significantly in 2021 (+1%) due to recent inflation surprises and the higher price of oil. We do not expect major revisions to the core inflation profile (1.4% in 2023) given the unchanged view on the current degree of slack in the economy.  

Disclaimer

This commentary is intended for non-professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.