ECB: How far can it go?- Rabobank

By FXStreet Analysts from Rabobank, expect a rate cut in the deposit rate of 10bp in March from the European Central Bank (ECB), but warned about other possible measures.

Key Quotes:

“Our base scenario is that the ECB cuts its deposit rate by 10bp in March. How markets will react to this outcome or other changes in the regime, such as the introduction of a staggered deposit rate regime, strongly depends on the additional measures that the ECB announces. An extension of the TLTRO obviously remains a live option, considering the recent turmoil in banking stocks and the fact that banks that borrowed in the TLTROs and fail to achieve their benchmarks as at 30 April 2016 will be required to pay back their borrowings in full in September 2016.”

“A removal of the capital key requirement would be a game changer, but politically so sensitive that ECB President Draghi may not want to go ahead without the Germany’s endorsement (Bundesbank’s Weidman is a non-voting member in March).”

“Moreover, a key question is how the market will interpret any change in the deposit rate and the accompanying language in terms of its implications for the future: is the ECB is willing to go even …read more

Source:: FX Street