ECB: Guidance on the growth risks balance - Rabobank

The research team at Rabobank explains that the ECB continues to very gradually change its guidance to markets and the latest feat of this was the 27 April meeting, in which the Governing Council decided to signal that risks to the growth outlook are “moving to a more balanced configuration”, though keeping the emphasis on the downward bias.

Key Quotes

“If economic data continues to improve, with hard data recently starting to catch up with the more optimistic survey data, the Council may use the June staff projections to justify upgrading the risks assessment for the growth outlook to ‘broadly balanced’. Crucially, this all does not yet relate to the risks surrounding inflation, which would be a signal of imminent policy changes.”

“Next to changes to the risk assessment, we believe the Council should consider adjusting its forward guidance in the second half of the year. In a speech earlier this month, Peter Praet suggested that the ECB’s forward guidance could become more data-dependent.”