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ECB to stand pat, reveal details of strategic review

ECB rate decision and press conference is the major focus for today. No change in monetary policy is expected. That is, main refinancing rate will be held at 0.00%. Deposit rate should be kept at -0.50% too. Pace of asset purchase program should also be unchanged at EUR 20B per month.

Forward guidance should also be unchanged as “the Governing Council expects the key ECB interest rates to remain at their present or lower levels until it has seen the inflation outlook robustly converge to a level sufficiently close to, but below, 2% within its projection horizon, and such convergence has been consistently reflected in underlying inflation dynamics.”

President Christine Lagarde might acknowledge in the press conference that recent data have shown some stabilization. But momentum of recovery, in particular in the manufacturing sector, has been weak. The board will remain cautious and risk to growth and price remain tilted to the downside.

Most attention will likely be on the details of the strategic review to be announced at the meeting. While this would be lengthy exercise, we expect the market to be particularly interested in the revision of inflation target. There have been talks that the current inflation target as “below but close to 2%” can be revised in favor of a symmetric target.

Here are some suggested previews on ECB:

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