European Central Bank likely to stand pat in January

The European Central Bank is set to meet tomorrow for its interest rate decision. According to a DBS Bank research report, the ECB is unlikely to give out any fresh measures. In December’s assessment, the ECB President Lagarde had hinted at subtle changes on the growth outlook, citing tentative signs of stabilization, with slow growth in the near-term, but better second half.

In all, growth risks were skewed to the downside but less pronounced than earlier in the year, noted DBS Bank. This view is strengthened by recent data – trade, industrial production, decade-low unemployment rate etc. which have steadied, although at subdued levels.

“With inflation, particularly core, showing signs of life (still way below target), current policy stance is seen as appropriate and supportive of growth. Passage of the Phase 1 trade deal and likely smooth Brexit in end-January will address few of the external concerns. The ECB’s year-long strategic review of the monetary policy framework is likely to be kickstarted, which might include a relook into the long-held inflation target”, added DBS Bank.