The governing council of the European Central Bank (ECB) holds its April meeting on Thursday, and while fireworks are unlikely, the bank’s rate decision and the monthly press conference will be keenly watched given recent improvements in the single currency area.
The bank will deliver its latest decisions at 12.45 p.m. BST (7.45 a.m. ET) and is all but certain to leave current monetary policy in place and maintain a promise for lengthy stimulus.
That means a deposit rate of -0.4% for banks, a base interest rate of 0.0%, and a quantitative easing (QE) program of up to €60 billion per month.
April marks the first month of the ECB’s curtailed bond-buying, which had previously stood at up to €80 billion per month.
While rates and the extent of QE are unlikely to change, what could shift is the bank’s stance. For the last several years, ECB President Mario Draghi has struck a largely dovish tone in speeches and press conferences. With the eurozone now growing faster than both the UK and the USA and headline inflation hitting 2% last month, some expect hawkish hints to work their way into Draghi’s comments.
The progress of centre-left candidate Emmanuel Macron to the second round of the French presidential election has raised the chances of hawkish sentiment.
Macron, who is strongly pro-EU, is widely expected to take victory in the second round and is the candidate most favoured in the financial markets given that his election would mean virtually zero chance of France leaving either the euro or the EU.
While the ECB does not make political judgments and would never endorse a candidate, had Macron failed to make the second round a minor market panic may have ensued, lessening the chance of the bank making a hawkish shift.
Draghi will speak at 1.30 p.m. BST (8.30 a.m. ET) from the ECB’s Frankfurt headquarters.
This post will be updated once the ECB’s decisions are announced.