Eurozone: Patience and cautious optimism – BNP Paribas

Research Team at BNP Paribas, notes that as in April, the ECB left its monetary policy unchanged, leaving the European economy time to absorb the easing measures voted in March, including one of the biggest (if not the biggest), the T-LTRO II.

Key Quotes

“Except for an upward revision in 2016, macroeconomic forecasts were not changed. Inflation is expected to remain capped at 1.6% in 2018, the same level as in the March forecast.

To justify the decision to maintain the current profile, Mario Draghi insisted that the easing effects of the measures announced in March have not been fully captured by the new projections.

Although monetary policy is likely to focus on implementing previously approved measures, new measures cannot be ruled out in case of an unwanted tightening of monetary and financial conditions and/or the materialisation of second-round effects.

Lastly, Mario Draghi also revealed the ECB’s position on the Greek situation. Despite the agreement that was reached in late May, the Governing Council has yet to reintroduce the waiver that would allow Greek banks to refinance normally via the central bank.”