Could Draghi soften his approach

The ECB has been militant this year. Yes, they say, inflation is higher but it's almost entirely due to temporary effects and will run off soon.

That's the message Draghi sent at the most-recent meeting and the message that most expect him to send on Thursday. It's a theme that's been repeated by top ECB officials.

That message has been undermined by inflation hawks but mostly political ones. The Bundesbank has largely stood behind Draghi as he shifted the focus to core inflation, which remains below 1% with few signs of acceleration.

What could concern him is the shifting mood elsewhere. The Federal Reserve is suddenly more constructive on interest rates and bond yields have moved up, suggesting the market is also getting concerned.

How Draghi could tone down the dovishness

Realistically, Draghi isn't going to put the brakes on ECB bond buying, despite shortages. He's also not going to declare victory of deflation or low growth.

What he could do is offer a more constructive assessment.

One line I'll be watch for is a commitment to maintain a "very substantial degree of accommodation". That's something that's been in the statement since September. It could be dialed back with something like an appropriate level. That would mark the beginning of the end of this era of easing.

What's priced in

The ECB is a long way from hiking but maybe not as long as you think.

The OIS market has been aggressively bidding up late-2017 as a possibility of a hike. For September the probability has risen to nearly 25% from 0% at the start of March. Given how little has changed, that seems out of line.

Those numbers contrast with analysts at Goldman Sachs who don't see a hike until late-2019 and Morgan Stanley who sees the ECB on hold at least through 2018.

On net, don't look for a U-turn from Draghi, at least not this month.

Forecasts

The other element to watch is the inflation forecast. These appear to have been leaked with unnamed sources, suggest the outlook for this year will be raised to 1.7% from 1.3% and 2018 to 1.6% from 1.5%. Importantly, 2019 will be left unchanged at 1.7%.

As a signal, that's shows the ECB taking even more stimulus off the table but it certainly doesn't call for hiking. If the euro jumps on those headlines, it should probably be faded, all else equal.

Timeline

The decision is due at 1245 GMT (7:45 am ET) with Draghi scheduled to start his press conference 45 minutes later. He generally speaks for about an hour.