- Exchange rate is not a target for monetary policy
- Looking at wide range of possible measures
- ECB concerned about low inflation doesn’t anticipate deflation
- Mid-term inflation projections are what really matter for next policy meeting
- Banking union complicates central bank tasks
- An important development that ECB has macroprudential tools
- Material consequences if Ukraine crisis aggravates
- ECB looking into what is happening to FX rate
The item in bold is probably the most important point we need to concentrate on and one that might give us an edge for trading the June meeting. It sounds like they will be making a decision more on the forecasts than possibly the actual data. This means we could see the market taking the euro up on stronger inflation numbers in both the revised data on Thursday, and the flash data in June as they price out a risk of policy changes. If the staff projections then show inflation staying low or going lower then the ECB is likely to act, as expressed by Draghi. Something to bear in mind.
