No answer – Five questions to the ECB

LONDON (Reuters) – When the European Central Bank convenes this week, investors will be looking for more details on the bank's plans to dismantle stimulus measures in times of crisis.

In June, the ECB went further than expected The monthly purchases of bonds will be wiped out after September, the 2.6 trillion euros scheme (3 trillion dollars) is expected to end at the end of the year and rates will stay low for a while.

Questions were left unanswered, however. Here are a few that investors hope to see addressed at Thursday's meeting.

1 / Will the ECB update its political guidelines?

Of course, it is an opportunity for the ECB to make some clarifications, but if the guidance on quantitative easing (QE) can be tightened, the one on the rates of interest should not be.

Yet ECB chief Mario Draghi will likely be squeezed by what the bank meant when she said she saw rates stay stable "at least until the end of the year. Summer 2019. "

This triggered a debate on the ECB's timetable. first rate hike since 2011. Reuters reported this month that some badysts felt that an increase was possible as early as July 2019 while others ruled out a move until the fall .

The money markets fully fix a 10 basis point increase in the deposit rate of 0.40% by October 2019 ECBWATCH.

(For a graph on the quantitative easing program of the European Central Bank, click on reut.rs/2LcDKn5)

2 / How will the ECB reinvest the bond funds coming to deadline?

With badet purchases coming to an end, reinvestments in bonds that the ECB bought under the quantitative easing program become a key factor for the markets.

By May of 2019, the average amount of monthly repayments is estimated at about 15 billion euros ($ 17 billion), about the same amount as net purchases of badets at the end of the year. last quarter of 2018.

The ECB has announced that it will reinvest maturing bond funds in the market, but there are questions about how this will do it.

According to one theory, the bank could buy more long-term bonds in order to reduce borrowing costs after the end of QE and limit the natural aging of its important bond portfolio. .

Another question is whether reinvestments will be spread across the block – allowing for some flexibility given the supply constraints in Germany and the Netherlands.

(For a chart on longer-term "semi-core" debt, the euro zone outperforms peers, click on reut.rs/2LDhRtr)

3 / What is the # 39, a growing commercial craze for the ECB?

As trade tensions between the United States and their partners intensify, the ECB may find itself caught in the middle.

While it has just announced the end of its recovery plan, the central bank could be confronted with a conflict that weighs on an economy dependent on exports and which pushes down the projections of growth and growth. # 39; inflation.

The European Commission this month reduced its 2018 growth forecast for the euro area to 2.1% from 2.3%, citing the threat of increased trade tensions.

"A slowdown in exports and therefore economic growth would bring growth back to almost 1% … but more importantly, it will weigh on inflation," Barnaby Martin, head of European credit strategy from Bank of America Merrill Lynch, I said.

"For the ECB, it will be difficult because after closing the QE, they might realize that inflation is absent."

(For a chart on the EU, growth forecasts of the eurozone would blame trade wars.)

4 / But can the ECB comfort itself with a stabilization of the indicators of growth?

Recent indicators suggest that the euro area economy is stabilizing after losing strength early this year.

Business growth accelerated in June, while annual inflation in the currency bloc is 2% – the level around which the ECB is targeting price hikes.

This backdrop is rebaduring for ECB projects.

More than 70% of economists polled by Reuters – 51 out of 69 – said they were confident that the ECB would raise rates before the next economic downturn. Eighteen said that they were not.

(For a chart on the euro zone's stabilizing economy, click on reut.rs/2LdBlbF)

5 / How does the ECB see Greece approaching its bailout exit?

Draghi could be pressed by recent comments to the European Parliament on Greece, which is due to leave its third international bailout in August.

Draghi said that Greece could be part of the QE if it had a waiver, but that such a lift was not justified under Greece's post-bailout. He added that the ECB would do its own debt sustainability badysis on Greece (DSA).

Analysts say that the fact that Draghi bought a DSA, only relevant if the ECB was still considering buying Greek bonds, suggests that the ECB might consider doing so once its conditions are met.

Although a DSA is unlikely as long as Greece will not have implemented the reforms decided in June with its EU creditors to lighten its debt profile, the question could to settle on Thursday.

(For a chart on Greece's debt to look at from the ECB's perspective, click on reut.rs/2Ld0wv1)