ECB preview: on hold for now – but an overall dovish tone

We expect the ECB to remain on hold at next week’s meeting. The data out of the euro area remain consistent with a continu ation of the recovery, though at a slower pace . The big drop in core inflation in August will have raised some eyebrows at the ECB, but erratic factors seem to be partial ly responsible and it is clearly too early to draw an y firm conclusions. The appreciation of the euro is starting to become a headache for the ECB . While it has not reached a point yet where a majority in the Governing Council sees a need for action , we expect some “verbal intervention” from President Lagarde during the press conference , signaling the ECB’s general willingness to ease policy further , should this be deemed necessary . Finally, it is safe to assume that many questions during the press conference will center on the Fed’s new “average inflation” policy strategy. It will be interesting to see to what extent President Lagarde will show some degree of sympathy for such a s trategy .