26 August 2014 Data Flash: ECB: Private GE in September Fourth, the crucially. market•based inflation expectations have declined in the last couple of weeks. The SPF survey-based indicator showed the first increase in the 5-year ahead inflation expectations balance for about 2 years, despite drops in nearer term expectations. But the rise was tiny (1.86% from 1.84%). The current crop of ECB Executive Board members seems keen to take a steer on medium-term expectations from market breakeven rates. These have weakened in the last couple of weeks. Draghi referred to this in unprepared comments in his speech at Jackson Hole on Friday. He said B/Es point to "significant declines at all horizons-. The 5Y5Y inflation swap he singled out as falling 15bp to below 2%. This is the third time the 5Y5Y has fallen below 2% since the start of the credit crisis. Draghi said "this is the metric that we usually use for defining medium-term inflation". Draghl said the Governing Council Twill acknowledge- these developments with inflation expectations and within its mandate "will' use all available instruments needed to ensure price stability over the medium term. There is a definitiveness to the message. Having questioned the stability of inflation expectations, it would be very difficult for the ECB to credibly claim on 4 September that inflation expectations "remain firmly anchored", at least not without announcing a new policy to better anchor those expectations. On balance, we think the data and Draghi's comment puts pressure on the ECB to accelerate the next phase of monetary easing. We believe the ECB will accelerate the announcement of a private GE (ABS purchasing) to 4 September. Draghi has some history of deviating off-script at a conference and subsequently convincing the Council to act. For example, his "whatever it takes" precursor to OMT in mid 2012. The risk is the Council plays for more time, arguing that O2 GDP was distorted, inflation is cl