ECB preview: opting for wait-and- see

The invasion of the Ukraine has dramatically complicated the picture further for the ECB: e nergy prices and inflation will be pushed higher, while growth will weaken . As it remains uncertain at this stage how significant this “ stagflationary ” shock will turn out to be, we expect the ECB to opt for a wait-and-see stance at the March meeting . More specifically, we expect the PEPP program to be ended and monthly net purchases under the APP to stay at €20 billion for the time being. We also expect Mrs Lagar d e to take a neutral stance with respect to a rate hike later this year, neither ruling it out, nor signaling that a rate hike is necessarily likely this year. The ECB will stress the high degree of uncertainty a t this point and its willingness to respond in either direction, depending on how the assessment of the inflation and growth changes once more data are available .