ECB: Shift in policy is highly unlikely - Westpac

Tim Riddell, Research Analyst at Westpac, suggests that a shift in ECB policy is highly unlikely, but the post-meeting press conference will provide Draghi another means of calling for structural reforms and the use of fiscal space to step up to the policy plate.

Key Quotes

“ECB’s Peter Praet reiterated the need to be “attentive to the possibility of adverse side effects of the low interest rate environment”. Both he and Draghi have discussed the impairment of monetary transmission. If repeated, markets may again ponder policy changes into March ’17, but EU rates are likely to remain contained whilst US rates edge higher, pushing the EU/US 2 year spread lower.

EU political and credit issues remain but have drifted from market attention. The risk of safe haven flows into CHF have abated, but low Swiss CPI will keep SNB’s NIRP in place.

As USD prospects improve, EUR and CHF should test the weaker sides of their ranges seen over the past year.”