What are the calls going into the ECB policy decision later?

Let’s dive straight into it.

Deutsche Bank

• 25 bps rate cut
• Focus on staff projections, whether capturing the trade war and defense spending
• Also focus on if policymakers continue to think that policy is still “restrictive”
• At the balance, “restrictive” to probably stay for one more meeting
• That means the policy statement can effectively remain unchanged
• Expect Lagarde to emphasise that policy path will follow the data, not be constrained by neutral talk
• A rate cut in April remains our baseline

ING

• 25 bps rate cut
• The critical part is whether the ECB will drop the “restrictive” label from its official stance
• A complete drop would be too hawkish
• So, there might just be some slight modification i.e. “less restrictive” or “hardly restrictive anymore”

Societe Generale

• 25 bps rate cut
• Reference to “restrictive” should remain
• That would suggest another rate cut at the next meeting in April
• That is in line with our call but we doubt that the data is sufficiently clear yet to
  send that message
• After the April rate cut, ECB will be in a better position to reassess medium-term outlook and risks
• That could see the ECB possibly shift to quarterly rate assessments

Barclays

• 25 bps rate cut
• Expect the ECB to remain non-committal and data-dependent
• April meeting is live and we forecast another rate cut
• Expect Lagarde to express similar views to January press conference as outlook is little changed
• We anticipate consecutive 25 bps cuts until June, before proceeding with 25 bps cuts in September and December for a terminal deposit rate of 1.50%
• But Germany’s fiscal reform could give the ECB a reason to reach a slightly higher
  terminal rate than we currently expect; though it doesn’t change the terminal rate forecast itself

CIBC

• 25 bps rate cut
• Growth projections likely to be downgraded in the coming year
• The risk is that the ECB pauses in April or June
• Guidance around timing and rate path to come will be the focal points this meeting

Goldman Sachs

• 25 bps rate cut
• A softening of
  the language around “restrictive” is most likely
• ECB might prefer to say that policy remains “somewhat restrictive”
• We are looking for a small downgrade to growth, broadly unchanged core inflation
• ECB to o reiterate that growth risks are to the downside and the disinflation process
  is well on track
• A pause in April is “possible if disinflation stalls or if activity data surprises notably to the upside”
• We continue to think that rate cuts in both April and June are likely
• That will be followed by one additional cut in July for a terminal rate of 1.75%

This article was written by Justin Low at www.forexlive.com.