The European Central Bank is expected to maintain its policy rate at 2.00% today and keep the non-committal forward guidance by following a “data-dependent” and “meeting-by-meeting” approach.
The European Central Bank is expected to maintain its policy rate at 2.00% today and keep the non-committal forward guidance by following a “data-dependent” and “meeting-by-meeting” approach. The focus will be mainly on the press conference where market participants will look for clues on the next ECB’s move, what the ECB’s reaction function will be and how the Governing Council is viewing the current situation.
Since the last ECB meeting, the economic data confirmed the expected increase in headline inflation due to the energy shock and the negative impact on growth. Today, we will get the Eurozone Flash CPI for April where headline inflation is expected to increase further but with still limited impact on the core measure. The latest ECB’s SAFE survey showed rising inflation expectations in the short-term but no impact on the long-term outlook.
Wage growth expectations have also moderated to 2.8% vs 3.1% in the prior quarter. We recently saw further deterioration in the Flash Services PMI for April which fell to a 62-month low, while Manufacturing PMI was artificially boosted by stock-building with weak underlying details. What caught everyone’s eye was of course the inflation section.