ECB is going to revise its inflation projections lower – SocGen

Kit Juckes, Research Analyst at Societe Generale, points out that they’re told that the ECB is going to revise its inflation projections lower (to 1.5% from 1.7% for 2019) and declare that the overall risk assessment is broadly balanced for the first time since Mario Draghi took office.

Key Quotes

“Since our own inflation forecast for 2019 is at 1.5%, maybe it’s unfair to suggest the downward revision of the ECB’s forecast (and the way it seems to have leaked into the press) is intended to help offset the shift in the risk assessment. But it probably is far to suggest that the ECB wants to avoid a major market reaction to the move, and the press conference may also be used to that effect. The ECB won’t want the Euro to strengthen too much before they start open discussions about the timing of the next reduction in the pace of bond purchases. That said, you can’t always have what you want and while they may succeed in holding the Euro down today, it’s likely to be a fair bit higher by the end of the summer.”