There was not a lot of news in ECB’s monetary policy meeting today. The ECB is ready to act again, if key figures disappoint, but still expect a gradual recovery during the second half of the year. There was no sense of urgency about more action at today’s press meeting.
Draghi sounded slightly more upbeat on growth stressing the recent improvement in survey data and maintaining the view that a gradual recovery is to be expected this year. The new staff projection actually sees slightly higher growth in 2014 compared with the 2013 forecast.
Draghi sounded slightly more downbeat on inflation, on the other hand, saying that underlying prices trends will remain subdued. The key 2014 inflation forecast was kept unchanged at 1.3%, which as we have stressed before is – at least partly – due to the mechanic oil price assumption.
Draghi did not sound like an ABS programme is ready for implementation. This could be either because some political decision needs to be taken at the EU Summit later this month about who takes the credit risk or it could be an indication that the ECB is still not technically ready. No news on the ABS programme at the next ECB meeting (after the EU Summit) would be a big disappointment.
On the monetary policy stance, Draghi said that the Governing Council saw no reason to act now, but the ECB is monitoring incoming data very closely and stands ready to act. Moreover, today’s decision was a consensus and hence some probably favoured another rate cut.
In our view, this means that the barrier for another refi rate cut is fairly low and could be triggered within a relatively short time span by disappointing key figures or continued fast pace of LTRO repayments and hence reduced level of excess liquidity.
The barrier for a deposit rate cut is still somewhat higher, in our view. Draghi had nothing new on this front.
We expect no further rate cuts from the ECB this time around.
Nordea