Brief preview of the European Central Bank meeting this week via BlackRock:
Summary:
- We expect the central bank to reinforce a low-inflation outlook for the medium term, paving the way for additional easing in 2022 and further supporting our tactical preference for euro
More:
- The ECB may choose at its September meeting to reduce the pace of asset purchases under its pandemic emergency purchase program (PEPP). The backdrop: easier financing conditions, especially with lower bond yields. Yet concerns that global financial conditions may tighten later this year around the likely start of the Fed's taper of its asset purchases might persuade the ECB to leave the pace unchanged. In any case, we see this as an operational decision - and not one sending a signal about future policy.
- The central bank may lift its near-term growth and inflation forecasts, but we expect its outlook to show inflation remaining far below the ECB's target over the medium term. Unlike the Fed, the ECB has not switched to target average inflation. This means any near-term overshoot of its inflation target - such as the recent upside surprise in the flash August print for euro area inflation - should not affect future policy decisions: The central bank will let inflation bygones be bygones. The weak medium-term inflation outlook implies that the ECB will need to step up its asset purchase program after the pandemic-era PEPP - which will run at least until March 2022 - expires.
Bolding above mine. Blackrock is overweight Eruope equities.
