Fra BNP Paribas:
Eurozone: Incremental steps from the ECB, consumer confidence likely to ease in April Two Executive Board members, Benoît Cœuré and Peter Praet, gave their latest takes on the economic and policy outlook on Wednesday.
Mr Cœuré’s comments were closer to the ECB party line than those he expressed a few weeks ago and suggest that it is too early for the ECB to review its forward guidance, in particular the sequence of policy changes. However, he referred to the risks to the economy as “balanced” and left the door open to changing the guidance in the future.
Mr Praet, while acknowledging some near-term upside risks, still sees longer-term risks as “tilted to the downside” but “much more balanced” than they have been. Overall, it is becoming increasingly clear that the ECB is not far from changing its language on the risk outlook. When it does this, it seems quite likely that it will also have to remove the reference to the potential for lower rates from its policy statement, as it would be inconsistent with risks being balanced.
This would be the first step towards the exit. If our forecasts of persistent solid growth and an acceleration of underlying inflation, albeit gradual, come true, we would expect the ECB to hike the depo rate later this year.
Thursday sees the release of eurozone flash consumer sentiment for April. Confidence has trended up over the past 12 months, rising by almost 5pp. However, we think it has probably reached its peak in this cycle, having declined marginally in the last two months. We therefore expect confidence to have edged lower again in April, to −5.5 from −5.0, consistent with the message from retail sales data suggesting that consumer spending growth has probably softened a little (Chart 1).
