Here Are The New ECB Projections Everyone Was Waiting On…

Ok, so as noted earlier, it’s the forecasts that matter from the ECB on Thursday. Specifically, what they show for 2020, which will be included for the first time. “The HICP projection could entail an interesting policy signal,” Commerzbank’s Christoph Rieger wrote this morning, adding that “1.7% seems most likely as this would show that the ECB expects to reach the lower end of its definition of price stability after two more years.”

“We think that the staff will have inflation in line with the mandate by end 2020, accelerating from 2019’s still borderline 1.7% yoy,” BofAML predicted, while Goldman saw +1.7% with Q4 2020 inflation at +1.8%.

Clearly, this is critical for the signal it sends ahead of 2018. APP goes to €30 billion in January and will likely be extended from September through the end of the year. After that, if things keep going the way they’re going, we should get a rate hike in 2019. Recent data continue to make the case for “Goldilocks” in the interim – that is, good on the growth front and not too good on the inflation front.

Draghi’s on the tape now at the presser. The usual talking points were reiterated as there will, of course, be no rate hike until after QE is wound down while reinvestments should smooth the transition out away from APP. Draghi notes that economic growth is running at a “strong pace” and noted that “price pressures are still muted” – again, that’s “Goldilocks.”

“An ample degree of stimulus is still need to boost inflation” but rising “employment is bolstering private consumption” and a broad-based global recovery (i.e. synchronous upturn in global growth) is underpinning exports.

Ok, with that out of the way, here are the key projections: