Draghi’s day to deliver has arrived – BBH
By FXStreet FXStreet (Delhi) – Research Team at BBH, suggests that the much anticipated ECB meeting is at hand. Yesterday’s disappointing eurozone CPI figures only fanned the anticipation and today the service PMI was softer than expected at 54.2, down from 54.6.
Key Quotes
“What will Draghi do? There are four moving parts.
The first is the deposit rate, which currently stands at -20 bp. Negative interest rates are a new development, and no one knows how far they can go. Ironically a cut in the deposit rate now seems among the less contentious things that the ECB will likely do. At least a 10 bp cut is expected, and the market may be disappointed with less than 15 bp. There is some talk of a tiered system that links the bank’s deposits with the deposit rate.
A second element is the duration of the program. It also does not appear particularly contentious. The September 2016 end-date was always soft and conditional on the proximity to the inflation target. The staff’s forecast for inflation appears to require more than a three-month extension. The market may be disappointed with less than a six-month extension.
Source:: FX Street
