As traders await today’s European Central Bank (ECB) meeting, it’s perhaps worth looking back at what ECB policymakers have said earlier in the month as a possible guide. In a speech on April 6, ECB Executive Board Member Benoit Coeure spoke of the downside economic risks attached to a rise in protectionism. Given the importance of exports to the German economy, and Germany’s importance to the euro zone as a whole, those potential trade-related economic headwinds could exercise some influence on ECB policymaking and tone. On April 9, another ECB Executive Board Member, Peter Praet, emphasised that euro zone “inflation developments remain subdued” while, although GDP growth remains robust, “the latest economic data and survey results point towards some moderation of late.”
A few days later, on April 11, ECB President Mario Draghi said that at some point nominal wages in the euro zone will begin to trend higher and “inflation rates will respond to the improvement in the economy which is in front of us.” But he also tellingly noted that “still we don’t see much of an increase in nominal wages.” Finally on April 12, Benoit Coeure spoke again. Coeure, perhaps unsurprisingly, reiterated that “ample monetary policy accommodation therefore continues to be necessary for inflation to reach levels closer to 2 per cent sustainably.” In itself that last comment is unremarkable but in the context of the other opinions expressed by Coeure, Praet and Draghi it might suggest that as the ECB sits down today it might be inclined to err on the side of caution on this occasion.
Written by Neal Kimberley, External Currency Analyst.