ECB meeting preview: Easing, take two – Nomura

By FXStreet Research Team at Nomura, continues to expect the ECB to ease policy again on 10 March against a backdrop of downward revisions to the staff projections, a continued deterioration in inflation expectations and increased downside risks.

Key Quotes

“Taking into account the latest information on further deterioration in the inflation outlook (5y5y reaching new low below 1.4% and weak February HICP inflation of -0.2% y-o-y and core 0.7% y-o-y), we expect the Governing Council to deliver the following “package” of measures:

• lower the deposit rate by at least 10bp

• increase the APP by €10bn per month to €70bn per month

• extend the APP by a further 3 months to at least the end of June 2017

• remove the deposit rate threshold for QE purchases

• announce at least 2 new TLTROs beyond the last scheduled operation in June 2016 (possibly with more favourable conditions)

• dovish communication: forward guidance on rates (i.e., present or lower levels for an extended period of time) and a discussion and expression of willingness to cushion the impact of lower negative rates on banks in future, if necessary.

In addition to the tangible action from the ECB, the communication on the potential …read more

Source:: FX Street