Researchers in the European banking group will assess recent ECB developments:
The ECB’s initial press release shows a worse condition than what the market predicts, while stressing the need for monetary policy for a long time. As a result of these conditions, the 10-year return on bond yields fell to 0.463% and the EUR / USD fell to 1.1102. Mario Draghi, head of the ECB's central bank, emphasized the importance of an increase in proportion to the central bank's inflation target. This is important because the central bank has set a 2% inflation target in the medium term. Draghi has reduced the details, but these details actually suggest that the ECB has no problem with a temporary inflation rate of more than 2 percent unless it chooses it as a political stance.
Draghi has made it clear that falling interest rates on deposits will be less than -0.4% to balance the negative effects of the long term on the profitability of the bank, but he does not provide details for the design of this policy.
Researchers say we expect the European Central Bank to choose gradual additional barriers, possibly lowering the 10% interest rate, with deposits starting at 0.4% in December, and reaching 0.5. Although bulk of the asset purchases will be centered on public debt, the ECB will likely buy relatively more corporate and covered bonds as it nears its self-imposed threshold on public-sector debt (33% of any one Eurozone member’s bonds). That said, we think the ECB will likely relax its position limits to cover the shortfall in sovereign debt available for purchase”.