MNI ECB Preview - February 2022: ECBs Baseline Assumption Facing Increased Pressure

ECBs Baseline Assumption Facing Increased Pressure

• Given the policy announcements in December, no material policy innovations are expected at the February meeting.
• However, this week’s meeting will present a communication challenge for the ECB as it attempts to affirm the baseline scenario (subsiding inflation this year, no near-term rate hikes) at a time when the Fed and BoE have become more hawkish and inflation fears have been rising globally.
• With that in mind, the ECB could opt to retain some optionality by stressing that inflation forecasts carry a high degree of uncertainty and that there are upside risks to inflation (perhaps citing the risk of persistent energy price pressures).

ECB Preview February 2022.pdf