Reasons for the ECB not to make a move

The main economic date for today in the eurozone is the monthly European Central Bank’s meeting. None of experts in Madrid expect a Draghi’s speech announcing a change of direction on the institution’s monetary policy via a cut rate or any other unconventional measure, although pro-growth policies and pro-liquidity will be welcomed.

“ There are no need of further interest rates reductions as they were in 2012, especially in a context of Zero Interest Rate Policy, in which impact of these financial variables are usually marginal,” Afi’s analysts assure.  They consider, however, that the ECB should be focused on controlling deflations risks with initiatives that boost growth and prices. They would include reinforcing forward guidance as well as fixing a minimun benchmark for both indicators. “ Given ECB’s conservative view those could be considered too ambitious, especially when cycle leading indexes are improving”.

To deploy a LTRO subject to credit policies for small and medium companies would be a much more convenient and feasible measure than fixing benchmarks similar to those of Fed, of course if credit to private sector remains stagnant.

On their part, JP Morgan’s experts  agree the ECB will not take any new action, although “probabilities of stopping to sterilize SMP ( Securities Markets Programme in its English initials)  would near 50%,” they say. The central bank will publish for the first time estimations until  2016. Figures of inflation, PMI index , retail sales  and GDP suit the fact that  Draghi will not make a move today.

According to JP. Morgan, “ they will revise inflation estimations  from 1.1% on a year –on- year basis to 0.9%  by 2014, while  increasing to 1.2% in 2015. For year 2016 inflation could reach  1.6%.”