ECB unlikely to consider a change in tone in its policy – TDS

By FXStreet According to analysts from TDS, the European Central Bank (ECB) set a very low bar with the inflation forecast and they expect inflation to rise faster that what the central bank projects.

Key Quotes:

“The ECB set a very low bar with their March inflation forecast—particularly for 2016.”

“We update the ECB’s recent macroeconomic projection with the latest oil price futures, and show that annual inflation should hit 0.4% in 2016 against their forecast of 0.1%.”

“Our analysis suggests that there might be just one more month of negative inflation in the euro area, against the ECB’s implied assumption that inflation could remain below zero until August. This should draw a line under any further deterioration in inflation expectations, and be a big relief to many Governing Council members.”

“Perhaps this was all part of a broader plan. From a risk management perspective, if the ECB had published a higher inflation forecast for 2016, any downside misses would have reignited market expectations of further easing. The ECB’s substantive March easing would not have been easy to push through, and as such, we are of the view that the ECB will be sitting on the sidelines for the remainder of the year.”

“An unbalanced inflation …read more

Source:: FX Street