Posted on October - 03 - 2010
ECB Preview: liquidity drop opens the exit door
Focus on exit strategy and institutional framework
On 7 October, we expect the ECB will leave the refi rate at 1%, defining the current level of interest rates as appropriate and, most likely, making no significant changes to the economic analysis. In contrast, the monetary analysis could sound slightly more upbeat, following the positive August M3 and lending data. As has often been the case of late, the Q&A will be the most interesting part of the press conference. The liquidity strategy after the expiry at the end of September of several LTROs will become a topic of discussion, while Trichet is unlikely to provide much color on recent developments in Ireland (even less so on the appropriateness for the country of tapping rescue funds at this stage) and the possible consequences for the eurozone from the Fed’s move towards QE2. A particular focus will be on the ECB’s position on the future institutional framework of the European Union – a subject on which Trichet already provided a very clear and articulated view on 27 September during his speech before the EU Parliament’s economic and monetary affairs committee.
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