Monday, 31 January, 2022
ECB – Summary of Analyst Views
Summary of Analyst Views:
• Analysts are unanimous in expecting no change in monetary policy at the February meeting given the
December announcement and the lack of fresh economic forecasts.
• President Lagarde is expected to reaffirm the December announcement and push back against premature
policy rate hikes.
BNP Paribas
• ECB policy is on autopilot now following the announcements at the December meeting with no new policy
decisions expected this week.
• Nonetheless, BNP Paribas expects the ECB’s communication to drift in a hawkish direction going forward.
• BNP Paribas believes that inflation risks are overwhelmingly skewed to the upside, with staff forecasts
potentially being revised in the coming quarters to show inflation reaching the 2% target well ahead of the
end of the projection horizon.
• The ECB is expected to stick with the plan laid out in December and not hike interest rates this year. Rather,
net purchases will end in December of this year, teeing up the first rate hike in March 2023.
Danske
• Although no major policy announcements are expected this week, the February GC meeting has become
more interesting in the wake of the recent Fed meeting.
• The ECB will convey a robust yet slowing economic outlook with elevated uncertainty around the inflation
outlook.
• Despite this uncertainty and growing divisions within the GC, the consensus opinion remains that achieving
the inflation target over the medium term is unlikely without wage growth.
• It would be a surprise if new TLTRO are announced this week. Danske expects the tiering multiplier to be
raised to 12 later in the year.
Goldman Sachs
• At this week’s meeting the GC will reiterate that a 2022 policy rate hike is premature, stress that it is
appropriate for the ECB to lag the Fed, but emphasise that policy decisions are data dependent and the GC
retains optionality.
• GS maintains its view that the ECB will be more patient with lift-off compared to market pricing, but ultimately
hike more than is priced.
• The ECB is expected to fine-tune its message on inflation by stating that underlying inflation metrics, including
inflation, remain subdued, that longer-run inflation expectations are now well anchored and have moved
closer to 2%, and that the recent rise in energy prices poses upside risks to the inflation forecasts.
• Looking further ahead, GS states that while a 2023 policy rate hike is possible if underlying inflation firms
more than expected, in their baseline the ECB waits until 2024.
HSBC
• No major policy changes are expected to be announced at the February GC meeting.
• The ECB will stick to its current narrative that the current inflation surge is transitory and even if inflation
continues to surprise higher in the coming months, the GC will not feel any urgency to act.
• The ECB is also likely to indicate that current market pricing of the first rate hike is difficult to reconcile with
the conditions set by the GC for raising rates.
• HSBC believes that the bar for changing the sequencing for ending QE and raising rates (with the first rate
rise pegged to follow the end of QE) is high.
• This further reinforces HSBCs view that a rate hike this year is unlikely.
• The Q&A at the February meeting may shed some light on the newly announced flexibility of PEPP
reinvestments including possibly moving away from the capital key.
• While HSBC expects a new TLTRO to be announced, this is unlikely at the February meeting. Rather, this
is likely to occur at the March meeting, or June at the latest, and likely with less generous terms e.g. no
additional discount to the marginal deposit rate.
ING
• No major monetary policy changes are expected at this week’s meeting.
• The ECB will confirm the December decisions, leave open the possibility of faster reductions in asset
purchases if necessary and stress the sequencing of policy rate hikes after the end of asset purchases.
• Despite the ECBs evolving view on inflation, it is not in a position to consider tightening monetary policy
anytime soon. ING stress that the current inflation surge owes more to supply than demand and so raising
rates would do little to resolve the current imbalance.
J.P. Morgan
• Despite the renewed focused on the ECB following the Fed’s hawkish pivot, JPM does not expect a material
shift from the ECB.
• While the ECB would likely want to wait until the fresh macroeconomic projections are available in March,
JPM believes it will take even longer than March for the ECB to signal a shift as it must become convinced
that inflation pressures are rotating from being pandemic-related to labour-market driven.
• President Lagarde will likely state that a rate increase in 2022 is unlikely.
• While recent growth and inflation developments have been hawkish, the hawks on the GC will likely wait until
later this year before making a bigger push in debates.
Nomura
• No major policy changes are expected at this week’s meeting given the updated guidance on asset
purchases at the December meeting and the lack of new macro forecasts.
• Nomura continues to believe that APP purchases could end earlier (in spring 2013) than the consensus
expects, which would pave the way for modest interest rate hikes (10bp per quarter from the middle of 2023)
Nordea
• No major policy decisions are expected this week given the announcements that were made in December.
• President Lagarde will stress that the ECB is not being driven by what happens in the US with its actions
instead determined by the euro area outlook.
• The overall tone of the meeting is likely to be slightly dovish. While President Lagarde is likely to talk down
the possibility of rate hikes this year, she is unlikely to give similar guidance for 2023.
• Nordea expects the first 25bp rate hike to come in late 2023 with net asset purchases stopped in the first half
of 2023.
• However, Nordea does not exclude the chance of the ECB ending net asset purchases as soon as the end
of this year and raising rates in early 2023, especially if wage negotiations surprise higher.
TD Securities
• No material changes to monetary policy are expected at the February GC meeting.
• While the GC is able to revise its guidance at any point, the reputational risks outweigh seeing its December
policy commitment through to at least mid-year. As a result, this week’s meeting is likely to be relatively
uneventful.
• The press conference may be a little more interesting, but President Lagarde is still likely to stress that a
2022 rate hike remains highly unlikely.
UBS
• This week’s GC meeting is likely to be an ‘interim meeting’ with no concrete policy decisions.
• New policy changes are instead likely to be announced in March or April.
o UBS expects the ECB to offer another series of TLTROs as of/after June but on less generous terms.
o The technical details of the tiered deposit system will be tweaked by raising the amount of liquidity
that is exempt from the -0.5% deposit rate from the current 6x to 10-12x of a bank’s minimum reserve
requirement.
o The ECB will revisit collateral rules for its refinancing operations and will need to decide whether it
will extend the waiver on Greek sovereign debt used as collateral.
• UBS expects the ECB to indicate at the December 2022 meeting that the APP will be terminated at the end
of Q123.
• The ECB is expected to hike the deposit rate by 10bp in June, September and December 2023.
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