ECB likely to maintain slightly dovish tone at this week’s meeting, says ANZ Research

The European Central Bank (ECB) is expected to maintain a slightly dovish tone at its monetary policy meeting scheduled to be held on April 27. Governor Mario Draghi has recently said 'a reassessment of the current monetary policy stance is not warranted at this stage' and he is expected to reiterate this, which should be perceived as dovish, ANZ Research reported.  

Following the latest ECB meeting, speculation about the sequencing of the ECB's exit from the very accommodative monetary policy increased and a month ago the market priced a 10bp deposit rate hike this year.

Now the pricing of the hike has been postponed to late 2018, after prominent ECB members expressed a dovish view, thereby dampening market participants' expectations. The recent dovish tone reflects the ECB's perception of the pricing of hikes as a tightening of the financial conditions, which it considered as unwarranted.

"Despite the expected dovish communication at the upcoming meeting, we believe the ECB could change its forward guidance on policy rates at the meeting in June. We still believe the ECB will announce an extension of its EUR60 billion monthly QE purchases at the September meeting and hence continue the purchase programme in 2018," the report said.