Some changes are expected but how material will they be?
After the strategy review findings earlier in the month here, changes are imminent to the introductory statement by the ECB later today.
Now, this is going to be more subjective than one might think as there is room for the ECB to play around here. So, what can we expect these changes to be?
The first and most conspicuous one will be the forward guidance and that should reflect the change in the strategy review to the "symmetric" 2% inflation target. I reckon the ECB might elaborate more on that with this being the passage previously:
The Governing Council expects the key ECB interest rates to remain at their present or lower levels until it has seen the inflation outlook robustly converge to a level sufficiently close to, but below, 2% within its projection horizon, and such convergence has been consistently reflected in underlying inflation dynamics.
So, expect something similar to portray their intentions leading up to the target.
The second thing to look out for, and perhaps more important one, will be whether or not they will detail out any views on inflation overshooting and what exactly is their reference to the "forceful or persistent" policy action when rates are at the lower bound.
The former in particular will be a point of interest, even if we may not actually see it materialise - not at least in terms of core inflation in the euro area.
Besides that, it will be interesting to also see whether the ECB will provide any specifics on a possible future changes when assessing the economic outlook amid ongoing developments, especially on the inflation front.
To put things short, if inflation expectations and inflation pressures do start to show tendencies of overshooting, how much of that will it prompt the ECB into reassessing its inflation outlook in the medium-term.
As such, the ECB certainly has newfound flexibility when it comes to communicating its policy intentions and/or changes from hereon. But whether or not they settle back into old habits will depend a lot on what we hear on a consistent basis in the months ahead.
Putting all this aside, the key aspects of policy i.e. PEPP and QE are unlikely to see any changes as the ECB has already said that they will reevaluate that in September at the earliest, if not surely by the December meeting.
Here are a couple of previews to wrap your head around before the event:
