The ECB meet on December 14, announcement at 1245GMT, Draghi speaks at 1330GMT
A brief summary of what Nat West is expecting
The ECB will announce that net increases in asset purchase programmes will end at the end of the year. That's expected. What else matters?
(1) PSPP reinvestment policy. We expect the ECB to direct purchases to bring NCB holdings gradually into line with benchmarks set according to the new Capital Key.
(2) New forward guidance. Forward guidance will become the ECBs main tool. We do not think the 'rotation' from QE to forward guidance implies any great changes to forward guidance, however. The time-based part of this guidance will be the main focus for markets. We expect no change (yet) to 'at least through the summer of 2019'.
(3) TLTRO-iii. This is coming, but not in December. There will be lots of questions about this. Draghi may discuss bank access to funding and their needs. He may talk about risks of financial fragmentation. He may indicate that teams are looking at TLTROs, but we expect neither details of the future programme, timing, or even a promise that it will happen at all.
(4) Forecasts for growth and inflation are likely to be cut. Incoming data has been weaker than expected, the risks to the global cycle have been increasing. Forecasts for 2021 will be added.
(5) The Q&A is likely to return to political risks. Both Italy and Brexit may be dealt with through the lens of financial stability and financial conditions. The recent FSR provides a framework that Mr Draghi is unlikely to add to.
We expect no rate hikes in 2019 from the ECB on lower inflation, heightened risks, and the need for an uneventful handover at the Presidency.
