ECB forum in focus

A mixed start to the new trading week, one in which the bulk of the significant market-moving events is due from Wednesday onwards.

That may make for choppy trading over the next couple of days, in line with what we’ve seen so far in Europe. We will still hear from some central bank policymakers, which could send ripples through the markets. Still, again, the biggest of these will also come on Wednesday, when Fed Chair Powell, ECB President Lagarde and BoE Governor Bailey all appear on a panel at the ECB Forum.

Reuters is out with the latest headlines, citing that the European Central Bank (ECB) is evaluating whether to announce the size and duration of the bond-buying scheme at its next monetary policy meeting on July 21

This follows reports doing the rounds on Tuesday that the central bank will likely drain cash from the banking system to offset any bond purchases made to cap borrowing costs for indebted euro zone states.

The ECB is expected to announce the new anti-fragmentation tool on July 21 when it will deliver its first rate hike in more than a decade.

So much monetary tightening and economic pessimism is now priced in that it may not take too much to see that pared-back, creating a tailwind for equity markets. But, of course, it’s when that happens that’s important, and many will have expected to see it already so we may have to be patient a bit longer yet.

European Central Bank (ECB) policymaker and Governor of the Central Bank of Cyprus Constantinos Herodotou expressed his take on inflation, in an interview with CNBC on Wednesday.

Herodotou said that he sees euro area inflation peaking this year.

European Central Bank (ECB) Chief Economist Philip Lane warned about a double-sided risk of higher inflation for longer and an upcoming recession, in an interview with CNBC on Tuesday.

“With the uncertainty, we have to manage the two risks.” 

“On the one side, that could be forces that keep inflation higher than expected for longer. On the other side, we do have the risk of a slowdown in the economy, which would reduce inflationary pressure.”

“So it’s very much having a clear vision for the next couple of meetings, having an orientation to move away from the very low rates we’ve had for quite a few years, but also fully respecting the importance of being data-dependent. And to retain the optionality to respond to what we see, in the coming months.”

European Central Bank (ECB) policymaker Gediminas Simkus backs the case for a 50 bps rate hike in September.

50 bps rate hike very likely for September.

ECB should move decisively towards policy normalization.

50 bps in July should be an option if inflation data worsens.

Fragmentation tool should serve as a deterrent.

Inflation will fall, it’s just a matter of time.