An on hold decision is expected from the European Central Bank monetary policy meeting on 08 March 2018

But ... there are indications to watch ...

Previews

Via Morgan Stanley:

  • The tone of the upcoming press conference, if not the forward guidance itself, will likely signal that QE is less needed.
  • Unlike the market, which prices in almost two hikes next year, we only see one small depo rate rise.
  • We believe that the press conference on March 8 will likely see some small changes to the central bank language, to prepare the markets for the end of QE in 4Q18.
  • At a minimum, we think that the Q&A will likely emphasise that things are getting better and so, implicitly, that the degree of monetary accommodation can diminish.

A stronger signal, either in March or in April, would be to modify the QE forward guidance, by no longer mentioning that the ECB stands ready to buy in bigger sizes again, if required, and just continuing to refer to the possibility of buying for longer, i.e., a short taper.

Our view is that the ECB will reiterate its guidance on rates. It will likely continue to say that they'll stay unchanged well past the horizon of the net asset purchases. We expect the communication on this front to change only gradually, probably in 2H18. We only envisage one 15bp depo rate hike in March next year.

Contrary to market expectations, we doubt that the central bank will hike twice next year. In part, this is because it would want to contain volatility and maintain expansionary financial conditions even when it retreats as a buyer of sovereign debt. But it's also because the stronger euro we project will do some of the tightening.

The growth and headline inflation numbers are likely to be revised down marginally in some of the outer years, on the back of the new assumptions for FX and oil prices. In euro terms, the new figures for Brent are likely to come down somewhat, though we suspect that the ECB will probably downplay these dynamics, as the price of oil has risen again after the cutoff for the central bank's forecast round, and the currency has declined slightly. If anything, the near-term upside risks to growth, an output gap that's closing faster than expected and perhaps an excessively flat path all argue for a small upgrade to the 2018 prediction for core inflation.

via RBC:

  • The March ECB meeting is almost certainly not producing any changes to either the QE programme or interest rates. Yet, that does not mean it is irrelevant.
  • The focus will be squarely on the forward guidance. Our reading of the mood in the ECB suggests that the most prominent part, the so-called sequencing, is unlikely to be touched.
  • The guidance on QE, however, particularly the reference to a potential upscaling in case of an economic deterioration, seems somewhat out of place, particularly in light of the strong economic performance of the euro area. We think this part will be dropped.
  • The ECB will also publish the latest iteration of its staff forecasts. We doubt, however, that there will be large changes. However, the staff forecasts should reflect increased confidence in the economic backdrop of the euro area.