SEB discusses its reaction to today's ECB January policy meeting.
"As expected, today’s ECB (interim) meeting delivered no monetary policy changes. All policy parameters including the wording of forward guidance remained unchanged. Contrary to our expectation, however, the ECB chose to downgrade its assessment of the balance of risks by stating these hade “moved to the downside” (previously “broadly balanced“). This opens the door, in our view, to a downward revision of ECB staff projections and, possibly even a change in the wording of forward guidance at the next meeting on 07 March. On the question of a new round of LTROs, the ECB kept all options open; we continue to expect the bank to offer new LTROs by mid-year," SEB notes.
"With regard to the timing indications of “lift-off”, i.e. the first policy rate hike, Draghi repeated his 13 Dec statement that market pricing showed that markets had understood the ECBs reaction function. Overall, the outcome of today’s meeting was somewhat more dovish than we had expected. The ECB has, in our view, effectively closed the door for ECB rates “lift-off” under Mario Draghi’s watch," SEB adds.