With most central banks in the world “normalizing” their policy, and some moving to raise rates somewhat dramatically, the ECB is in a unique position.

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While there is a lot going on, and plenty of things for ECB members to talk about, there isn’t much for them to do. So, tomorrow’s ECB policy meeting could be a non-event, in terms of an immediate reaction in the markets.

That doesn’t mean that it isn’t important. In fact, analysts will be scrutinizing the views of the different members to get a better understanding of where things could be going. Specifically, if there is reason to reassess when the ECB might start adjusting its policy.

Current estimates are that the ECB will keep its asset purchase program going well into next year. Therefore, this isn’t a major concern yet.

What is normal, anyway?

Unlike the Fed or the BOE, the ECB was already in easing mode before the covid crisis hit.

Interest rates were already negative, and there was already an asset purchase program in place. This makes the ECB a lot more similar to the BOJ compared to other large central banks.

Returning to pre-covid “normal” for the ECB then implies no rate hikes and only a reduction in quantitative easing.

That doesn’t mean that a “taper” by the ECB wouldn’t have an impact on the markets. Nonetheless, traders are facing a different reality when it comes to monetary policy on the European continent.

What should we look out for

Although not having as many problems as the UK and the US, Europe hasn’t been immune to supply and logistics issues.

Prices are creeping higher, even if they are not threatening to change monetary policy yet. Still, they have become enough of an issue for at least ECB Chief Lagarde to comment on.

The consensus among ECB policy members seems to be that inflation will be “transitory” as always. But now authorities in the US are starting to recognize that inflation isn’t transitory.

That said, this might move the consensus among central bankers to acknowledge that price constraints will be with us for at least several months. That would be more in line with the reports from major corporations both in the US and in Europe as they expect to raise prices in the coming months.

What can the ECB do?

Economic growth in Europe has remained sluggish. And the ECB has struggled for a long time to get inflation up. Even during the recovery, economic growth has been lackluster.

Generally, this would leave the ECB with a lot of room to keep not just interest rates low, but maintain quantitative easing for a long time.

So, with the expectation that ECB members will have a lot to say, the market will be attentive to see if they say anything about inflation. Then the market could move up its expectations for when the emergency asset purchase program might end, and strengthen the euro.

Otherwise, unless Lagarde says something unexpected at the post-meeting presser, the euro could find itself sliding lower as we move towards the end of the year.