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ECB Preview: New year, same issues - Nomura

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Jan 21, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

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    FXStreet (Delhi) – Research Team at Nomura, suggests that the Governing Council meets against a backdrop of renewed global financial market uncertainty and a substantial decline in oil prices and inflation expectations since the 3 December meeting.

    Key Quotes

    “Although we do not expect any changes to policy this week, the meeting is important for assessing the tolerance level within the Governing Council to the significant weakening in the (short-term) inflation outlook that has taken place and the earliest point at which the ECB is willing to make a “reassessment” on further easing.

    While some members of the Governing Council were resistant to further measures on 3 December, the recent Account of that monetary policy meeting indicates that the Governing Council has room – and potential appetite – for further easing, in our view.

    We expect a similar position to September 2015, with the ECB noting that renewed downside risks have emerged to the outlook for growth and inflation. However, we expect the Governing Council at this stage to judge it premature to conclude whether the renewed sharp fluctuations in financial and commodity markets will have a lasting impact on the achievement of a sustained adjustment in inflation.

    Overall, we expect the easing bias to remain, with the Governing Council repeating it is willing and able to act by using all the instruments available within its mandate to maintain an appropriate degree of monetary accommodation.

    Any direct hint this week that the degree of monetary policy accommodation will require re-examination at the March meeting in conjunction with new projections will increase the probability of further easing being implemented as soon as the 10 March meeting.”
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