ECB meeting: three things to expect from the ECB monetary policy decision

The European Central Bank (ECB) is expected to release its second monetary policy decision for 2017 on Thursday. Prior to this decision, economists and analysts are unanimous of their projections that Europe’s central bank will keep the interest rate dovish. However, some changes could also be expected, particularly with ECB tuning its message to a more reassuring economic forecast.

Dovish interest rate

The ECB is expected to maintain dovish with its interest rates. Back in January, the central bank set the interest rate on the main refinancing operations at 0.00 percent, and the interest rates on the marginal lending facility at 0.25 percent. The deposit facility was also remained unchanged at -0.40 percent.

Inflation rate announcement

The ECB might as well maintain these rates; even if the inflation target for February was achieved at two percent. “We expect the ECB to maintain its dovish stance at the meeting this week, although inflation has reached the two percent target,” Market Watch reported Pernille Bomholdt Henneberg, senior analyst at Danske Bank, saying.

Eurostat announced on March 2 that the inflation rate for the Eurozone has finally reached two percent, as targeted by the ECB. This was the first time the inflation rate hit two percent since 2013.

The ECB, however, may maintain rates because the increase was be driven by oil and unprocessed food prices. Price pressures, however, remained weak. “The ECB has said it will not change its monetary policy based on such a rise in inflation,” Henneberg said.

The two percent target inflation rate expected to have been achieved on February Analysts, however, said that ECB President Mario Draghi and his team are still expected to announce about the program they will use to watch and wait to see if inflation is here to stay or merely driven by energy prices. The ECB is also expected to see as to whether the political risks from elections in the Netherlands and France are realised.

Chief Economist of ING Frankfurt Carsten Brzeski said that the two percent inflation target could signal the ECB to push for tapering. However, Brzeski said that the central bank will not want to add any new uncertainty on the eve of two important elections in the Eurozone.

Reassuring sound economic condition

The ECB is expected to announce a positive outlook for the Eurozone following a survey that revealed an almost six-year high as volumes of new orders and export business supported the region's manufacturers while the service sector also gained traction. “The acceleration in growth, employment and prices signaled by the survey suggest that analysts will begin to pull forward their expectations of when the ECB could begin tapering its stimulus,” CBNBC reported Chris Williamson, the chief business economist at IHS Markit, saying.