J.P.Morgan: ECB Struggling To Take A Firm View

In the wake of ECB President Lagarde’s Tuesday address, J.P.Morgan note that “reading between the lines, it still seems that the ECB is minded to accelerate the post-PEPP taper, but that it does not have a clear sense of where it will go after that with APP and rates. Comments from other ECB policymakers have already suggested that a mid-year lift-off is still as “unlikely” and “far-fetched”. Lagarde’s comments are consistent with this even though she did not make this very explicit. We think the real problem for the ECB is that it is clearly struggling to take a firm view due to the latest inflation surprises. The combination of data-dependence and uncertainty in how to interpret the latest data make a firmer message difficult at this stage.”