ECB: Will offer updated forecasts next month - BBH

Research Team at BBH, suggests that the ECB staff will offer updated forecasts next month and there are two areas that many investors expect action.

Key Quotes

“First, following the staff forecasts, it will be clear that officials cannot be confident that its inflation target will be approached.  Eurozone fiscal policy became a little easier this year as ostensibly to cope with the refugee challenge.  It is anticipated to be somewhat less accommodative next year.  The 80 bln euro a month of asset purchases may be extended from March until September 2017.  This would be the second extension.

Second, the extension of the asset purchases may aggravate the shortage of some securities in the Eurozone.  Some speculate that the capital key (a function of size of the economy) as the determining mechanism of how the 80 bln euro in asset purchases is distributed among the member may be abandoned.  We demur.  There are a number of other adjustments that can be made, and we see the capital key as an important principle that is unlikely to be easily eschewed.”