ECB: too soon to revisit forward guidance in January - Danske Bank

Next Thursday, the European Central Bank will have its first meeting of 2018. Analysts from Danske Bank do not expect the ECB to change its language. 

Key Quotes: 

“The ECB’s December accounts stated that: ‘The language pertaining to various dimensions of the monetary policy stance and forward guidance could be revisited early in the coming year [2018]’. We do not expect the ECB to change its language next week.”

“Instead, we think the first change in language on certain parts of the stance and forward guidance will come at the 8 March meeting, as the potential end of QE is still 8 months away and the effect of the new purchase rate is still to be assessed.”

“Recently, comments from hawks within the Governing Council (GC) have dominated the financial press. They reflect the view of a more holistic view of the economy and inflation, and we see this view slowly getting traction within the GC.”

“The growth indicators continue to surprise on the upside. We view core and ‘super core’ inflation as the key figures/variables to follow for the timing of the first hike.”

“We expect the trend for tighter spreads and flatter curves in the euro fixed income market to continue. Further, we expect to see repricing of the front of the EONIA curve.”