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MNI (London)
--Updated Staff Projections Likely ECB Stand Out Feature
By Christian Vits
     FRANKFURT (MNI) - Early year market expectations that the European Central
Bank would make some significant changes to the wording of the post-meeting
statement in March have all but disappeared, with many watchers now forecasting
another month with the status quo intact.
     Former European Central Bank President Jean-Claude Trichet would possibly
have said "it is of the essence" to find an exit point to the bank's asset
purchase programme. That's not how current President Mario Draghi's will likely
play it, though.
     His position may be to leave it as it is. No wording change in the
statement -- at least nothing fundamental -- and no insight into the Governing
Council's thoughts about an exit from its extraordinary measures.
     "If he really wants to enforce his position, he will succeed -- he is the
President," a well-placed Eurosystem source told MNI about Draghi.
     Although radio silence on policy change is likely, we will at least get the
fresh staff projections. These will be mostly unchanged, underlining the current
policy stance.
     Financial market turbulence could be another argument to stick to the
policy statement's present wording. "An argument which certainly will be
mentioned. Constancio almost always notes this and that [the more dovish] part
of the council will follow," the Eurosystem source explained.
     "(Chief Economist Peter) Praet and (Executive Board member Benoit) Coeure
are essential, how they present the matter at the beginning of the session," the
source said, pointing out that Coeure has taken more independent positions in
the past. "In the meantime, it seems not so much coordinated with Draghi
anymore, Coeure more or less takes his own decisions."
     As noted in the last minutes about the policy meeting, there is some
opposition. It showed that the Governing Council believed, "the language
pertaining to the monetary policy stance could be revisited early this year as
part of the regular reassessment at the forthcoming monetary policy meetings."
     Against this background, the sentence that the Governing Council stands
ready to increase the asset purchase programme in terms of size and/or duration
could be dropped.
     At the same time, there is no concrete commitment to a change in the
wording, and "early this year", a phrase used in the minutes of the December
meeting when talking about discussing a change in guidance, could conceivably
mean as late as April.
     There is unlikely to be much clarification over the central bank's policy.
"It was concluded that such an adjustment was premature and not yet justified by
the stronger confidence," the report of the January meeting said.
     What's more, latest data haven't strengthened the case of those arguing in
favour of a wording change. Inflation fell to 1.2% in February, down from 1.3%
in the previous month and business sentiment over the outlook slipped, although
sentiment about the current state remained positive.
     Draghi might also highlight the euro's recent appreciation, which has
gained 5.3% against the dollar over the last three months, another headwind for
both growth and inflation.
     And political problems remain: While political deadlock in Germany has been
resolved with the two-third majority vote of the Social Democrats for a grand
coalition with the conservatives, Italy faces a huge challenge to form a
     On top of such concerns, U.S. President Donald Trump's announcement of
tariffs on steel and aluminium and his threat to impose them on European
automobiles as well, could weigh on the growth outlook of export-led European
economies, particularly Germany, the Eurozone's growth engine.
     Given all this, the Governing Council may conclude to keep calm, remaining
cautious one more time. But a change to a slightly tougher stance on policy
might be not too far away.
--MNI London Bureau; tel: +44 203-586-2225; email:
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