ECB unlikely to adopt any changes to forward guidance on interest rates, downgrade GDP forecasts: Wells Fargo

The European Central Bank (ECB) is not expected to adopt any changes to forward guidance on interest rates but will probably downgrade its GDP and CPI forecasts at its monetary policy announcement on Thursday, according to the latest research report from Wells Fargo Economics.

A host of comments by ECB policymakers recently noted that the central bank will take to discuss possible adjustments to its TLTRO program ahead of its upcoming policy announcement later this week.

Its current language that rates will remain at present levels “at least through summer 2019” affords it flexibility to wait until subsequent meetings (probably June) to make adjustments to that language, the report added.

On the economic forecasts ground, the ECB policymakers are widely anticipated to lower estimates for GDP and CPI for this year. Wells Fargo estimates a GDP growth of 1.5 percent in 2019, although risks are seen as tilted to the downside.

"Overall, while our base case is that the ECB will not announce a new round of TLTROs this week, we still think rate hikes are a long way off (we expect the first deposit rate hike in December). The June meeting seems to be the most likely candidate for its next rate signal, and thus could be the key one to watch in assessing whether the euro is in fact eventually headed higher on a more sustained basis," the report commented.