What to expect from this week’s ECB meeting
The European Central Bank is expected to bolster its stimulus programme this week, even as signs of recovery appear across Europe.
ECB meeting to take place amid economic shock
The European Central Bank (ECB) meeting this week takes place in a very different world from the last one. We have endured tens of thousands of deaths from coronavirus and an economic shock in Europe unlike anything since the Second World War.
Firstly, the bank will have to deal with the awkward topic of its growth forecasts. The March forecasts provided three scenarios, with gross domestic profit (GDP) dropping by 5%, 8% and 12% respectively for 2020. It is likely that the June meeting will see a forecast somewhere between the 8% and 12% drop. Beyond Q2 however, forecasts are even more of an exercise in guesswork than in normal times. Some countries are seeing solid rebounds in activity, to around 70%-80% of normal, while others lag with recoveries of 60%. As a result, we can expect forecasts to change sharply as the year goes on.
Inflation predictions are also difficult to make at this time. Widespread unemployment, falling energy prices and the closure of businesses does not augur well for higher prices, although some council members think supply disruptions will be among the key effects providing some upward lift to prices.
ECB needs to act fast
The ECB’s current PEPP (Pandemic Emergency Purchase Programme) will run out in October. Coupled with this is the German constitutional court ruling, which hovers like a cloud over ECB actions and may take the Bundesbank out of its stimulus programme.
As a result, the ECB needs to act fast, and will therefore choose to increase the size of the PEPP at this meeting instead of waiting to see how markets and the economy behave in Q2 and Q3.
IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.
The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.
No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk. Please see important Research Disclaimer.
Please also note that the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.
Seize a share opportunity today
Go long or short on thousands of international stocks.
- Increase your market exposure with leverage
- Get spreads from just 0.1% on major global shares
- Trade CFDs straight into order books with direct market access
Live prices on most popular markets
- Forex
- Shares
- Indices
See more forex live prices
See more shares live prices
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.
See more indices live prices
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.
