– European Central Bank (ECB) to Retain Zero-Interest Rate Policy (ZIRP), Narrow QE Program.

– Will the Governing Council Increase Its Efforts to Ward Off a Taper-Tantrum?

Trading the News: European Central Bank (ECB) Interest Rate Decision

The European Central Bank (ECB) is widely expected to retain the zero-interest rate policy (ZIRP) as it struggles to achieve its one and only mandate for price stability, but the Governing Council may sound more dovish this time around in an effort to ward off a ‘taper tantrum.’

Why Is This Event Important:With the ECB on course to narrow its asset-purchases to EUR 60B/month, the central bank may continue to reduce its quantitative easing (QE) program ahead of the December 2017 deadline, but President Mario Draghi and Co. may increase their efforts to tame market speculation as the growth outlook for the Euro-Zone remains tilted to the downside. With that said, the Governing Council may keep the door open to further extend its non-standard measures in order to encourage a stronger recovery.

Expectations: Bearish Argument/Scenario

Release

Expected

Actual

Consumer Price Index Core (YoY) (MAR A)

0.8%

0.7%

Economic Confidence (MAR)

108.3

107.9

Gross Domestic Product s.a. (YoY) (4Q P)

1.8%

1.7%

Waning confidence paired with soft inflation may encourage the ECB to further support the monetary union, and the Euro may give back the advance following the French election should the central bank show a greater willingness to carry the QE program beyond the December 2018 deadline.

Risk: Bullish Argument/Scenario

Release

Expected

Actual

Purchasing Manager Index- Composite (APR P)

56.4

56.7

Construction Output (MoM) (FEB)

—

6.9%

Retail Sales (MoM) (FEB)

0.5%

0.7%