Actually, it could have been a rather boring session.

When the ECB Council, the highest monetary policy body of the central bank, meets for the interest rate meeting this Thursday, it does not yet want to decide on the future of the multi-billion dollar bond purchases by the central bank.

ECB President Christine Lagarde specifically selected the December meeting for this.

Christian Siedenbiedel

Editor in business.

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But the sharp rise in energy prices and, last but not least, the surprising withdrawal of Bundesbank President Jens Weidmann at the end of the year make the meeting exciting.

Now, at least according to many economists and capital market experts, the central bank will no longer be able to present a completely uneventful meeting.

Weak euro, higher returns

At least verbally, the central bank is likely to try to dampen inflation expectations somewhat. “We assume that the ECB will send out a deaf signal to counteract the trend towards higher market-based inflation and interest rate hikes that has been observed in recent weeks,” says Karsten Junius, economist at Bank Sarasin. "One will certainly try not to let inflation expectations run too high," believes Michael Holstein, DZ Bank's chief economist.

The central bank will not change the key interest rates, and the pace of bond purchases in the fourth quarter is basically fixed and can be adjusted from week to week.

What the ECB can use, therefore, are primarily statements that can be interpreted as announcements for its further course - and this is anything but unimportant for the financial markets at the moment.

In any case, it is striking that since the previous ECB meeting, inflation expectations on the financial markets have risen further, bond yields have increased and the euro exchange rate has weakened again.

The inflation forecasts, which were only raised by the ECB at the previous meeting in September, have already been overtaken by reality, says Carsten Brzeski, an economist at Bank ING.

The ECB expects 2.2 percent inflation for the full year 2021, 1.7 percent next year and 1.5 percent in 2023. According to the developments of the past few weeks, that is already too little “purely technically”, says Brzeski.

"Inflation will be higher and growth will be lower," predicts economist Junius.

The minutes of the September meeting of the Governing Council, which were recently published, also made it clear that the central bank is now also wrestling over the question of how great the upside risks to inflation are.

That should keep the council members busy on Thursday too.

All statements by ECB President Lagarde on Thursday should be checked in the financial markets to see whether it is possible to read out what the ECB wants to do with its bond purchases when the PEPP crisis program expires in March next year - and what time horizon it will be for the complete suspension of the Bond purchases and a possible first rate hike there.

Tactical considerations on both sides

It will be exciting to see how the announcement of Bundesbank President Jens Weidmann's resignation will affect the power structure in the Governing Council and the discussions in this body.

Weidmann is seen in the council as the leader of the “hawks”, these are the members who advocate a tighter monetary policy, opposed to a majority of “doves”, ie the members who tend to plead for a loose monetary policy.