October 28, 2021

What Do Investors Expect For Tonight's ECB Policy Meeting?

 Investors are not expecting any change from the European Central Bank (ECB) policy meeting which is expected to keep monetary policy unchanged at tonight’s policy meeting.

However, with inflation soaring to a 13 -year high and several other major central banks stressing about price pressures will continue for a longer period, the ECB may also be no exception to say its concern.

The latest statement from ECB President Christine Lagarde on current inflationary pressures will be scrutinized by investors as the next indication of the direction of the central bank’s monetary policy.

If he still insists that price pressures are temporary and not worried about the recent inflation spike, investors are likely to be disappointed and give up their holdings on the euro.

Some previously published economic data also showed signs of weakness due to rising inflationary pressures amid global supply chain disruptions.

At the September edition policy meeting, the ECB slowed the coronavirus emergency bond purchase rate (PEPP). However, the central bank clearly said the changes were ‘recalibration’ and not ‘tapering’ or reduction because the changes were made on PEPP rather than the asset purchase program (APP).

At the time of writing, euro trading is moving calmly around 1.1600 against the USD, signaling investors ’vigilance ahead of the latest policy announcement.