ECB releases its account of the January monetary policy meeting

  • Eurozone growth could be below potential for several quarters
  • Probability of recession is low, but levels of uncertainty are high
  • Unclear how long growth dip will last or if it impacts the medium-term
  • Concerned that weakness could affect inflation expectations
  • Market pricing shift for rate hike is in-line with forward guidance
  • Forward guidance has served the ECB well
  • Plans swift analysis of TLTRO, warns against 'hasty' decision on the matter

The key takeaway is that they are growing more uncertain about how much longer the economic slowdown will run for this year. Given PMI data today, it's certain that it will at least cause Q1 growth to be a bit of a drag as well.

The other notable thing - which they have communicated before - is that they see market pricing for a rate hike as being accurate, which means traders aren't wrong not to expect a rate hike this year for now.

There's nothing here to really suggest much changes to the March meeting in two weeks' time but I would expect markets to build towards a dovish expectation as we move closer to 7 March.