ECB preview: Rising downside risks, but no action

We expect the ECB to stay put at its January meeting , a fter several policy measures w ere announced in December. Although uncertainty with respect to the growth and inflation outlook remains high at this point , neither latest macro data n or market moves demand any immediate response from the ECB. Inflation is likely to edge higher in the coming months, mostly on the back of technical factors. We expect the ECB to signal that it will “look t h rough” this increase and that it will reconsider its policy stance only once there is evidence for a genuine increase in the underlying inflationary pressure.