BNY Mellon: ECB Preview

October 25, 2018

By Neil Mellor, Senior Currency Strategist, BNY Mellon

Mario Draghi has shown little inclination to deviate from a script of cautious positivity in recent ECB press conferences, but this strategy is not without its evident challenges.

On recent evidence, Mr Draghi is likely to make familiar allusions to data-conditionality and to issue assurances about accommodative policy to placate any overt concerns about policy normalization.

Yet given investors’ conspicuously short-term horizons, the risks posed by tapering are surely starting to come into sharper focus - and not least for the fact that current turmoil in global stock markets risks exacerbating weakening economic trends in the Euro-zone.

That annual wage growth across the eurozone has jumped to 2.2% in Q2 from 1.7% has clearly been an important development in the ECB’s quest to normalize policy.

But then, this amounts to catch-up with inflation which has hovered around 2.0% since May