### POV: The focus at this week's ECB meeting...>

ECB: ### POV: The focus at this week's ECB meeting will be the modalities of the

new TLTRO programme. Although Q1 GDP was better than expected, growth remains

sluggish and market-based measures of inflation expectations have deteriorated

sharply - both of which have fuelled the flattening term structure. This

suggests that the ECB will opt for a relatively favourable pricing structure for

TLTRO-III in order to encourage take-up and stimulate lending.

- Neutral: No change to policy rates or forward guidance. Marginal changes to

economic forecasts. TLTRO-III offered at MRO with a 20bp discount to incentivise

lending.

- Dovish Surprise: Forward guidance is extended to the end of Spring 2020, or

even further. Significant downgrades to economic forecasts. TLTRO-III discount

takes the borrowing cost close to the deposit rate.

- Hawkish Surprise: The ECB signals that growth and inflation will pickup

through the remainder of the year, which reduces the need for generous TLTRO-III

terms. The new programme effectively serves as a liquidity tool rather than a

means to boost lending to the economy.