MNI POLICY: Things To Watch Out For In The ECB Minutes

-- Focus on mid-year slowdown, protectionist fears

By Luke Heighton

     LONDON (MNI) - Investors will look for more insight into European Central

Bank thinking on the threat of protectionism and a mid-year slowdown in German

economic data when it releases minutes of its July meeting on Thursday, but

further details of plans for winding down quantitative easing and tightening

policy may have to wait until September's gathering.

     Below are key points to watch for, with the ECB making clear that

significant monetary stimulus is still required:

     -- How much did discussion focus on weakening data? While ECB staff

macroeconomic projections remain consistent with the objective of medium-term

inflation below but close to 2%, June saw German factory orders fall 4.4% on the

previous month, while capital and consumer goods orders slumped by 4.7% and 4.5%

respectively. At his July press conference, the central bank's president Mario

Draghi attributed a pull-back in growth from "very high" levels in 2017 mainly

to weaker trade impetus.

     -- To what extent are global trade tensions and deepening emerging-market

turmoil weighing on the ECB's deliberations? An upsurge in protectionism could

seriously impact confidence, and especially business investment, according to

Draghi, but he stressed that more analysis of its effects would be impossible

until it was clear precisely what trade measures might be implemented around the

world.

     -- The bank has said it intends to keep interest rates on hold until "at

least until the summer of 2019", but any discussion on how this phrase,

originating in June's announcement, should be interpreted would be of maximum

interest.

     -- It would be a surprise to see more on a crucial point: the ECB's plans

for reinvesting its maturing bonds. On this Draghi was clear: any plans remain

anchored to the capital key, although the council had not yet not discussed

anything about reinvestment policy. "We haven't discussed even when to discuss

it," he told reporters.

     -- Italy was only mentioned briefly in the press conference, and it would

be a surprise were it to have featured heavily in the discussions beforehand.

Draghi responded at length to a question from MNI about Greece, and it is

possible it could feature in the minutes, given the proximity of Athens' August

21st bailout exit, and the end of the waiver program that had allowed Greek

banks to use government bonds as collateral for ECB loans.

--MNI Frankfurt Bureau; +49-69-720-146; email: luke.heighton@marketnews.com

[TOPICS: M$X$$$,M$$EC$]