European Central Bank likely to keep policy unchanged in March

The euro area economic growth is becoming increasingly widespread, but sluggish inflation has limited the European Central Bank from implementing a more rapid rate of policy normalization. Core CPI inflation was just 1 percent in February, and ECB Preside Mario Draghi’s testimony to the European Parliament cited that “inflation has yet to show more convincing signs of a sustained upward adjustment”.

But, an overall pickup in growth, along with a tightening labor market, should underpin slowly rising inflation in the quarters ahead, noted Wells Fargo in a research report. While the ECB is not anticipated to make any policy changes tomorrow, the central bank is expected to end its current EUR 30 billion monthly rate of bond purchases by the end of 2018.

“We then look for the ECB to slowly begin to raise rates by first hiking the deposit rate in H1-2019, while leaving the overnight interbank rate and two-week refinancing rate unchanged for the time being”, added Wells Fargo.

At 16:00 GMT the FxWirePro's Hourly Strength Index of Euro was bullish at 99.2995, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at -0.279989. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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