ECB Vice President Luis de Guindos said in an interview, the consequences of invasion of Ukraine are “quite clear”, as higher inflation and lower growth. That should be reflected in in June outlook.

He sees “no reason why we should not discontinue our APP programme in July”. But the timing for the first rate hike will depend on the economic projections. “Nothing has been decided so far,” he said.

“From today’s perspective, July is possible and September, or later, is also possible. We will look at the data and only then decide,” he added. Then, the rate hike cycle will “depend on the data” and the “evolution of inflation.

Full interview here.

ECB Executive Board member Benoit Coeure urged the central to give more details in the forward guidance, regarding the pace of rate hike when it starts. He said, “should economic conditions warrant, there might be a case for the Governing Council to go beyond the timing to lift-off (rates) in further clarifying the pace at which it expects to remove policy accommodation.”

And, “a further clarification of our reaction function might help market participants and the broader public to better anticipate the likely future path of short-term interest rates.”

Currently, ECB’s plan is to half the monthly asset purchase to EUR 15B starting October, and stop it after December. Interest rates would stay at present levels through the summer of 2019.

In an interview with Reuters, ECB Executive Board member Isabel Schnabel remarked that the slowdown to 2.4% in Eurozone’s November flash CPI a “very pleasant surprise.” More importantly, that made “further rate increase rather unlikely”.

Schnabel emphasized the significance of the decline in “underlying inflation”, which has proven “more stubborn”, is now also “falling more quickly than we had expected”. Such trends have bolstered her confidence in achieving ECB’s 2% inflation target no later than 2025.

However, she cautioned against premature victory declarations over inflation, expecting some upticks in the coming months due to fiscal changes and base effects, and not ruling out potential new spikes in energy or food prices.

On the growth front, Schnabel acknowledged mixed signals. While some hard data points are concerning, softer indicators, like PMI, are showing signs of stabilization and are “giving us hope.”

She forecasts a gradual uptick in growth next year, driven by rising real incomes, which should boost confidence and consumption. Regarding the labor market, she noted some softening but does not anticipate a significant deterioration or a deep, prolonged recession.

Full interview of ECB Schnabel here.

In the latest ECB survey for Q2, professional forecasters revised down growth, inflation and core inflation forecasts for both 2019 and 2020. Inflation are projected to be below ECB’s 2% target over the whole forecast horizon. Also, the reported noted that “probability distributions continued to indicate relatively high uncertainty around expected inflation in two years’ time.”

On growth, “respondents considered the current level of uncertainty to be very high and to be having an economic impact, mainly via companies’ investment decisions.” Also “risks to the forecasts for real GDP growth remained to the downside.” The most cited downside risks was “potential impact of a hard Brexit. Many respondents refer to “further escalation of trade conflict between US and China, an the apparent slowdown in China”. “Very few”mentioned upside risks.

HICP inflation forecasts (previous at Q1 2019):

• 2019 at 1.4% (down from 1.5%)
• 2020 at 1.5% (down from 1.6%)
• 2021 at 1.6% (down from 1.7%)
• Longer term at 1.8% (unchanged)

HICP core inflation forecast:

• 2019 at 1.2% (down from 1.3%)
• 2020 at 1.4% (down from 1.5%)
• 2021 at 1.6% (unchanged)
• Longer term at 1.7% (unchanged)

GDP growth forecast:

• 2019 at 1.2% (down from 1.5%)
• 2020 at 1.4% (down from 1.5%)
• 2021 at 1.4% (unchanged)
• Longer term at 1.4% (down from 1.5%).