ECB Preview (June): Paving the way for a September QE extension – HSBC

By FXStreet Research Team at HSBC, notes that since the ECB released its comprehensive package of stimulus measures in March, the economic news flow has generally been positive.

Key Quotes

“GDP in Q1 grew by a solid 0.5% q-o-q. Moreover, oil prices in EUR terms are up by 16% since ECB staff made their last predictions in March. Coupled with the impact of the stimulus announced in March, we think that at the next ECB meeting on 2 June the ECB’s inflation forecast will be revised up throughout the horizon, and from 1.6% to 1.8% for 2018.

…but Mr Draghi will emphasise the ECB’s willingness and ability to do more…

The ECB’s head Mario Draghi has emphasised the need for patience with inflation but the Council will likely be irked by the level of disbelief implied by market measures of medium-term inflation expectations. For that reason we think the ECB will want to reinforce its commitment to do “whatever it takes” and remain on the front foot. At the same time, it doesn’t want to end up with the market expecting a large package of new measures at every meeting. As we have seen, particularly at last December’s meeting, Mr Draghi treads a fine line …read more

Source:: FX Street