ECB preview: It’s all about the strategy

According to Carsten Brzeski, Chief Economist at ING Germany, this week's European Central Bank meeting should be rather uneventful regarding monetary policy but the official start of the strategy review should be the highlight.

Key Quotes:

“Waiting for more guidance on growth and inflation developments, the highlight of this week’s meeting should be the announcement of the official start of the strategy review. A lot has been said and speculated, both by market participants and ECB officials. Now, with all changes in the ECB’s Executive Board behind us, it is time to set out some parameters like, for example, scope and timing of the review. Christine Lagarde already gave some ideas at the December meeting, also stating that in her view the review should be concluded before the end of the year.”

“In this regard, decisions to include external parties, be it academics, politicians, ‘ordinary people’ or other interest groups would have a clear impact on the length of the process, making the deadline of end-2020 more ambitious than it currently sounds. According to Lagarde, the review would also look at the monetary policy instruments. A recent working paper of more than 300 pages by influential ECB officials already gives an idea of where the ECB currently stands.”

“In our view, the most important part of the review will be an assessment of the definition of price stability and how to reach it. We still think that eventually, a new definition (of “around 2%) would institutionalise symmetry while at the same time provide maximum flexibility; more than any point range would offer.”

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