Divyang Shah
IFR Senior Strategist
1) the release of the flash estimate for November this Friday, and
2) updated inflation/growth forecasts next week following the ECB meeting.
The data, however, are not expected to add to disinflation concerns, with consensus looking for a 0.8% y/y print after the 0.7% y/y shocker last month.
The updated ECB staff projections next week are likely to portray a story of low inflation continuing over the next two years, but with no signs of deflation.
Both are consistent with the ECB’s message that the easing early this month was to deal with deflation risks and the view that low inflation will persist, and not due to concerns over actual deflation.
The markets are unlikely to get much in the way of new information, with the ECB likely to reiterate that all options are still on the table, including a negative deposit rate, outright asset purchases, and another LTRO.
On the latter, the decline in excess liquidity has continued and is likely to fall close to €100bn in Q1 2014, suggesting that some form of VLTRO will be required early next year.
