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ECB preview: monetary policy with a new strategy
After the publication of its strategy review, the ECB’s July policy meeting should be more interesting than initially thought . T he task for the Governing Council is now to translate the new inflation target into an adequate policy stance. The new strategy, in our view, implies more patience but not necessarily immediate additional easing measures. We therefore expect the forward guidance to be adjusted at the July meeting, implying a higher threshold in terms of inflation dynamics before the ECB will start to tighten policy. More specifically, we exp ect the wording to signal that the Governing Council will need to see the 2% inflation target to be reached before it will raise policy rates. This would be also consistent with the ECB’s willingness to let inflation to be “transitory moderately above target” .
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Natixis
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Dirk Schumacher
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