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WisdomTree : ECB to remain in wait and watch mode

European Central Bank President Mario Draghi is most likely going to acknowledge the slowdown in the Euro area growth since their last meeting on December 13, 2018…..

By Aneeka Gupta – WisdomTree


Since then, key economic data in the Euro area has weakened further – Industrial Production declined 1.7% in November and the composite PMI fell 1.2% to 51.1 in December.

On the flip side, wage growth has picked up, unemployment has fallen to its lowest level since October 2008 and fiscal policy has turned more expansionary.

However, given the uncertainties that lie ahead – in terms of Brexit and ongoing trade wars, we expect the ECB to remain in wait and watch mode and defer any decision on the change to normalization policy (if any) at the meeting on 7 March, when the new macro projections are due.

The governing council has been known to alter its risk assessment at meetings that contained new staff projections.

Therefore, we expect the 7 March meeting to be of greater emphasis as that is when the governing council will reassess the balance of risks.

The prior ECB growth forecasts of 1.7% for both 2019 and 2020 appear optimistic in our opinion and will most likely be revised downward.

Source: ETFWorld

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