Not even a record consumer inflation reading will make today's ECB meeting any more interesting than one might expect.
Don't get me wrong. The pressure is certainly on for Lagarde & co. to do something. But in trying to phase out PEPP purchases and introduce more bond buying after March, they are put in a rather unenviable position at the moment.
There isn't anything major to watch in terms of policy decision today so it will all boil down to the language and communication.
The most important thing is arguably the ECB's inflation outlook. In that regard, I'd expect the statement and Lagarde to reaffirm that they still see inflation pressures abating and easing in the latter stages of the year. Yes, the can has been kicked down the road. But that's exactly what they will keep doing for as long as they can get away with it.
Besides that, I would expect the statement and any mention on rate hikes to be maintained. If anything, Lagarde will continue to play down rate hikes this year just so it matches with the central bank's take on inflation.
So, where does that leave us?
There is a major discrepancy at the moment in terms of what the ECB is saying and what the market is pricing in for rates. The OIS market is pricing in nearly three rate hikes by the ECB by the end of the year and in all likelihood, we might not even see one.
As such, any pushback on rate expectations today will likely pose a downside risk for the euro and bond yields in the region. Keep that in mind when trying to make sense of Lagarde's remarks later in the day.
