Tuesday, 19 January, 2021
• No change in interest rates or QE expected this month
• Markets are pricing just 4% chance of a 10bp cut this month and now only a 50% by Dec 2021
• Main focus will be on the press conference and Lagarde. In particular:
o Insights of the rate of PEPP bond purchases
o EUR currency strength and potential implications on the inflation outlook
o Insights on ECB’s definition of ‘favourable financing conditions’ and what would trigger more
accelerated ECB purchases
o Insights on the difference of opinion between hawks and dove within the council
BoA: expect no change at this meeting. Nevertheless feel that the Dec meeting did not explicitly rule out a
depo rate cut so there is potential for a cut in the future. See potential for a tweak of the TLTRO III program to
make it more attractive for banks.
Barclays: expect no change in mon policy at this meeting. Highlight that since the Dec meeting, the UK-EU
have signed a Brexit deal, COVID-19 issues have worsened due to the virus mutation but at the same time US
fiscal loosening is on the cards. On the currency front, the EUR is almost unchanged from Dec’s level.
Citi: expect this meeting to be a non-event. At the Dec meeting the ECB highlighted that they wanted to
‘preserve favourable financial conditions’. This meeting may provide them the opportunity to provide a sense
of tolerance on what ‘favourable financial conditions’ represents.
Danske: expect an uneventful meeting with no new policy signals. Although the euro area economy is still in
lockdown probably until the end of Q1, the press conf may focus on areas of optimism due to roll out of the
vaccines and better weather conditions. ECB is likely to counteract any sell-off or steepening of the curve on
the anticipation of better economic data.
GS: expect this meeting is unlikely to bring any significant news. Risks could be reiterated to the downside
given the COVID developments and the council is monitoring the EUR currency and its potential implications
for the inflation outlook.
ING: expect no new policy action at this meeting with the focus on Lagarde’s press conf. Short term risks are
tilted on the downside with the potential for a more extended lock-down. Longer term, risks are more on the
upside with the signing of a Brexit deal plus US fiscal stimulus. Unless we see a rapid EUR strengthening or an
unexpected surge in inflation expectations, the ECB is likely on the sidelines for the next few months.
JPM: expect an uneventful meeting given the announcements at the Dec meeting. A substantial change in the
outlook would be needed to prompt an ECB response at this stage.
MS: expect no change in policy in Jan and see the ECB on hold for the rest of the year following Dec’s extension
and top-up of the pandemic responses.
Nordea: No change in policy expected at this meeting. Focus will be on Lagarde’s comments regarding the
future of bond purchases and any comment regarding the differences of opinion between hawks and doves.
NWM: expect no change to mon policy at this meeting but Largarde once again reiterating that risks are tilted
to the downside and the ECB is prepared to support the economy in this difficult phase. Expect to see a
material jump in Jan inflation but the ECB is likely to downplay this as temporary. Believe PEPP is the main
policy tool and therefore rate cuts are not on the agenda.
Soc Gen: expect this meeting to be a non-event following the new measures at the Dec meeting. Lagarde is
likely to reiterate that the PEPP envelope may not be fully utilized or recalibrated if needed.
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