FXStreet reports that analysts at Wells Fargo expect the European Central Bank (ECB) to further expand its asset purchases at its July meeting. They argue inflation in April slowed and the Eurozone registered a record decline in GDP growth during the first quarter. According to them, the risk is clearly for an earlier policy move.

“Eurozone Q1 GDP shrank 3.8% quarter-over-quarter in Q1, the largest decline on record in data back to the mid-1990s, and fell 3.3% year-over-year.”

“We currently expect the ECB to increase the size of its PEPP program a further €500 billion at its July meeting and likely extend that program by a few months. Before easing monetary policy further, we think the ECB would ideally like to monitor the economy and COVID-19, as well as assess the impact of its various LTRO operations, through Q2. The risk is clearly for an earlier policy move though, likely depending on the stability of Italy’s bond market in the interim.”