What to expect from today’s ECB meeting?

And here we go again… The European Central Bank is holding a new monetary policy meeting in the day and investors are trying to figure out where the regulator is actually heading as political tensions and uncertainty continue to weigh on global stocks.
Market participants have been speculating on a gradual reduction of the buying bonds program, which currently stands at 60 billion euros a month. The bank purchases governmental and private bonds to promote economic growth by injecting money into the economy.
While some economic indicators have recently suggested sustainable economic recovery in the European Union, many economists still criticize stimulus as it promotes unequal terms for nations within the bloc. For example, EU’s first economy Germany is facing negative returns on their savings while countries like Italy or Spain continue to borrow cash at nearly no costs.
“To prevent speculation of rate rises, we think the ECB will wait until Q4 before adjusting its forward guidance,” said the analysis team of HSBC.
Expectations for an ECB interest rate hike increased as Eurozone’s inflation has recently reached the 2 percent yearly goal set by the regulator. On this matter, ECB President Mario Draghi said that indicator will be monitored but it won’t trigger an automatic policy adjustment.
“We are not yet at a stage when inflation dynamics can be self-sustaining without monetary policy support. The recovery of inflation still depends on the very favourable financing conditions that firms and households enjoy, which in turn depends on the substantial degree of monetary policy accommodation we have in place today,” said Draghi earlier this month.
Also, April’s policy meeting comes at a difficult time in the political sphere. The first round of the French presidential elections have just ended few days ago, leaving centrist candidate Emmanuel Macron ahead on the race, but still dangerously close of his main opponent far-right candidate Marine Le Pen.
Recent polls showed basically no chances for the National Front leader to become the next president of France. Nevertheless, traders remain on a cautious-mode as extremism continues to be a threat for European markets, the euro and of course, the union itself.
For this reason and possibly until both candidates meet on May 7 for a second round, economists predict that ECB authorities will keep benchmark rates steady today, with short term rate at a record-low 0.00 percent and the facility rate at -0.40 percent.
The European regulator will make public its latest interest rate decision at 11:45 GMT, with analysts expecting no changes to the monetary configuration. The meeting will be followed by a press conference from ECB President Mario Draghi at 12:30 GMT.