At yesterday meeting, the European Central Bank (ECB) kept the key interest rates unchanged and mentioned it will examine the potential of a new purchase program.
“At the July meeting Mario Draghi sent a strong signal to the market, that further stimulus is on its way to help the ailing economy. As we expected, the ECB adjusted the forward guidance as a first step, opening up the possibility of policy rates remaining ‘at present or lower levels’ at least through H1 20.
In our view this has set the scene for a deposit rate cut, which we expect to be announced at the September meeting (we expect a 20bp rate cut), paired with a restart of the QE programme.”
“Markets are currently pricing 12bp of cut in September. However, while Draghi more or less pledged that a highly accommodative monetary is going to be needed for a prolonged period of time, he remained deliberately vague on the what/when/how of the exact policy measures, which tasked committees have been charged with examining until September.”
“All this reinforced the message of a more uncertain inflation and growth outlook, that will be the base of the easing package to be unveiled in September.”