Governing Council Meeting: Limited Surprises Expected as Members Signal Cautious Approach to Easing
Anticipating surprises during this week's European Central Bank Governing Council meeting seems unlikely, given the thorough preparation leading up to the event. The majority of the Council's members, 16 out of 26, expressed their views on key issues, including ECB President Christine Lagarde and Chief Economist Philip Lane, in the days preceding the ban on public statements. This extensive pre-meeting context contrasts with the period before the December monetary policy meeting when only about half as many Council members shared their opinions.
The abundance of information suggests limited room for unexpected developments on Thursday. The prevailing sentiment indicates that the ECB is unlikely to commit to a specific start date for easing, with several Council members pointing towards June as a potential candidate. Even statements from influential figures like Latvijas Banka Governor Martins Kazaks and Bank of Lithuania Chairman Gediminas Simkus align with the idea that significant cuts may not occur until mid-2024.
Contrary to market expectations of an April easing, Lagarde's recent remarks suggest a cautious approach, emphasizing the need for more data in April-May before making decisions in late spring or early summer. The Council members, including dovish policymakers, refrain from encouraging excessive market speculation, citing the importance of future data developments and the high level of uncertainty.
In the face of market rate expectations, Lagarde is expected to use measured language, avoiding any premature declarations of mission accomplishment. The concern over the disparity between market expectations and inflation projections underlines the importance of maintaining a restrained approach to monetary policy. The upcoming monetary policy statement may not deviate significantly from the previous one, and despite slight economic fluctuations, the overall forecast is expected to remain on track.
For those seeking excitement, the March 7 meeting and press conference may provide more substantial developments, as new forecasts could influence expectations of easing.
Therefore, this Thursday's meeting is anticipated to be the last uneventful one for a while.
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