Dovish tone to hint at action next month

We doubt that recent events and data releases have been significant enough to ensure more policy action from the ECB at its May meeting. But developments in the inflation outlook and in money markets suggest that the Bank’s two “contingencies” for further action might soon be met. We expect a very dovish tone from President Draghi to hint that such action might be taken at the June meeting. This could involve an interest rate cut together with more long-term loans to banks or even a programme of asset purchases.