If you’re an ECB enthusiast with some holiday days to spare, next week could be the ideal time to take them. If you’ve ever thought about skipping an ECB meeting, this is the one to sit out. Here are three reasons why.
Reason one: very little new information available
Since the ECB’s last policy meeting in September, data releases have been sparse and inconclusive. While PMIs and the European Commission’s economic sentiment indicators edged up slightly in September, hard data from August – covering consumption and industrial production – was disappointing.
Headline inflation in September did exceed the ECB’s 2% target for the first time since April, but as yesterday’s macro data quickly becomes outdated, the real issue is the lack of fresh insights before next week’s meeting. Only PMI data and Germany’s Ifo index will be released ahead of Thursday. Key figures such as inflation, third-quarter GDP estimates, and the Commission’s sentiment data will all arrive on the day of the ECB decision itself. Unfortunate timing, indeed.
Reason two: no pressing urgencies
With the French political situation having avoided further escalation, for now, and financial markets seemingly at ease with the current political instability, there is even less of a need for ECB action than in September. French spreads have not widened further and the fact that the political instability in France is domestically driven has made any case for ECB intervention even weaker. As long as France doesn’t comply with the European fiscal rules, it will be hard for the ECB to start or even discuss the Transmission Protection Instrument (TPI).
Reason three: doves and hawks are holding fire until December
Comments by ECB officials since the September meeting suggest that the latent tension between doves and hawks has not escalated further. Instead, it seems as if there is a silent agreement to wait until the December meeting. While Isabel Schnabel stated that the ECB should maintain its current interest rate level, citing upside risks to inflation, the new Austrian central bank governor, Martin Kocher, remarked that there was an “equal chance” for a rate cut or hike as the next ECB move. The most often heard comments simply reiterate the now familiar sentiment that the ECB is in a ‘good place,’ with little urgency to adjust rates.