The European Central Bank meets this coming Thursday and while no one expects any change in monetary policy settings, the sharp and increasingly broad based pick up in economic activity is likely to see at least some commentary cover this increasingly favourable news. Some in the market are looking for the ECB to discuss the timetable for starting to reverse the super-stimulatory stance of policy.
The Eurozone economy went from strength to strength during 2017, with GDP growth accelerating to above trend and the unemployment rate falling. But with inflation holding below 1.5 per cent, the ECB has been happy to allow that sort of growth momentum to build. This increasingly powerful momentum has recently drawn some of the more hawkish policy makers – especially from the ultra-cautious Bundesbank – out of the woodwork to start flagging the idea of winding back quantitative easing and / or increasing interest rates. With inflation remaining well below the ECB target those calls are likely to continue to fall on deaf ears, at least for now.
