ECB: Benign projections - Westpac

Tim Riddell, Research Analyst at Westpac, suggests that one takeaway from last week’s ECB staff updates was the benign convergence of inflation and growth to levels that underscore the absence of any need for rapid change in ECB’s guidance.

Key Quotes

“This month has seen further moderation in activity surveys and the past week’s undershooting of the expected pullbacks in industrial production. Although growth has a solid platform into this year, such moderation ties in with the ECB’s benign projections.”

“Of more immediate interest has been the response of both ECB and EU officials to the risk of tariffs on trade depressing growth potential. The monitoring of FX was alluded to at the ECB’s meeting, but this week Draghi specifically mentioned EUR strength weighing on inflation as EUR/USD attempted to edge back above 1.24.”

“Affirmation of Merkel as Chancellor should allow for a more constructive EU Leaders’ meeting but Brexit and trade are likely to weigh on EU Leaders as well as cap EUR.”