European Central Bank's measure plan to remain unchanged

Published 02.06.2016 00:40

Economists do not expect a new measure plan or further interest rate cut to come out of the European Central Bank (ECB) meeting on Thursday. But, they expect the ECB to make upward revisions in macroeconomic projections

While the European Central Bank (ECB) is not expected to announce a new measure plan during Thursday's meeting, the bank is expected to revise its projections for inflation and growth in Europe's June macroeconomic projections, which will be announced during the meeting.

Specialists from international finance institutions do not expect a new measure plan to come out of the ECB meeting today; however, projections are expected to be revised indicating an upward trend. After struggling with extremely low inflation in the region for a while, the probably measures and new details regarding the monetary expansion policy for the ECB's future are closely monitored by markets and investors. During the ECB meeting, which will be held Vienna on Thursday, economic projection and factors keeping inflation under pressure will top the agenda. While the specialists do not expect a new measure plan or a decline in interest rates to occur the meeting, they believe that new clues regarding future probable monetary changes could be shared. On the other hand, discussions regarding the use of Greek government bonds by Greek banks as security deposits for the loans they will take from the ECB are expected to be on the EGB's agenda as well Thursday.

Upward revisions

are no surprise

DekaBank chief economist Ulrich Kater said they did not expect an important issue or additional measures in terms of markets in the meeting since the previously announced government's bonds asset purchase program has yet to begin. Stating that the ECB's macroeconomic perspectives are highly stable, Kater said marginal upward revisions in inflation and growth projections would come as no surprise.

The information note sent by Market Securities' chief economist, Christophe Barraud, said: "We do not expect the [ECB] Governing Council to announce new, untraditional measures and decrease the interest rates more in the next meeting." Stressing that the bank would want to see the impact of the previous measures, Barraud said: "The ECB may stay remain in ‘wait-and-see' mode until the third quarter by evaluating the impact of measures taken in March but not previously implemented." Barraud added that ECB President Mario Draghi may address both international risks - such as developments in the emerging markets - and China's growth, along with local risks such as Britain's potential exit from the European Union, the elections in Spain and the rise of the populist parties in Europe. Regarding the new macroeconomic projections for June, Barraud said: "Inflation predictions for 2016, 2017 and 2018 are likely to be revised upward being supported by the measures in March, credit growth and the radical recovery of oil prices." He also foresaw that the growth predictions of the eurozone could be upgraded.

Greece may be

discussed in the meeting

The information note published by UniCredit eurozone chief economist Marco Valli suggested that the ECB is not likely to announce a new policy during Thursday's meeting and that the bank is focused on implementing the measures announced on March 10. Indicating that Greece may be discussed in the meeting, Valli said: "We estimate that two interesting issues will come forth on Thursday. The first one is the ECB's new macroeconomic projections, and the second is the discussions regarding the re-acceptance of Greek bonds as security deposits in the ECB's refinancing operations."

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