ECB will be walking tightrope on Thursday
Policy makers can’t back away from inevitable end to stimulus, but aim to temper expectations
Investors will be watching the European Central Bank meeting on Thursday for more signs of movement toward a tapering of stimulus, after comments from bank president Mario Draghi sent markets into a frenzy late last month.
Analysts expect the same forward guidance to be reinforced “subtly,” through acknowledgement that tapering is being discussed, with action saved for September, Marcus Ashworth writes for Bloomberg.
Slightly more dovish tone?: “While the ECB is probably happy that market participants have finally understood that tapering can eventually happen, this preparation aims to distort markets as little as possible,” Handelsblatt quoted Carsten Brzeski of ING-Diba as saying. “A little taper tantrum is fine. A full-fledged panic is clearly not.”
“[Draghi] will not want to trigger much more appetite for the currency, so any remarks about the strength of the economy will be tempered with caution about the tapering timeframe”, writes the Financial Times.
Wheels already in motion: “Still, analysts at Nomura expect the ECB to drop a commitment it has had towards expanding its asset purchase programme.”