Tomorrow’s ECB rate meeting will be the last one for Mr Draghi as ECB president. In September meeting, the ECB cut the deposit rate by 10bps to -0.5%, restarted the asset purchases by €20bn/month, repriced TLTRO’s, and strengthened the forward guidance.
Here is a preview of what major banks expect from the ECB meeting tomorrow.
Analysts at Westpac Bank believe that monetary policy is very likely to be unchanged tomorrow, and Mario Draghi might reiterate the call for fiscal stimulus.
Nordea Bank will follow the meeting with a focus on three critical details:
- the ECB has not yet specified what it will buy under the new round of QE
- the ECB did not raise the issuer limit in September
- tiering looks likely to lift short-term rates by a few basis points, which could make it more difficult for the ECB to cut again.
Nordea argues that the chance of another interest rate cut by the end of the year is small.
Scotiabank doesn’t expect any further measures but doesn’t rule out additional details surrounding the implementation. They also assume that Draghi will reiterate the need for fiscal policy to take a more significant role in the Euro area economy.
ING Bank is expecting confirmation of the economic assessment and reiteration of September decisions, and they don’t expect any hints at future measures.
Barclays expects the ECB’s tone to stay dovish, without further easing for now and point that interest rate cuts seem less likely without a significant worsening in the bloc’s economic data.
Danske Bank expects the ECB to be side-lined in terms of new policy signals tomorrow but argues that the recent drop in inflation expectations raises the possibility of action at the next policy meeting.
With most banks anticipated no major change at the next rate meeting, trading in the Euro might be muted. However, our analyst, Senad Karaahmetovic thinks we should focus on the EURJPY. Read: ECB Preview: EURJPY Levels to Watch to learn more.