21 Jan 2016
ECB: Leaving the door open - RBS
FXStreet (Delhi) – Research Team at RBS, expects the ECB to leave its deposit rate and asset purchase programme unchanged.
Key Quotes
“Further easing initiatives would probably damage the ECB’s credibility coming so soon after last month’s package of measures. And while the recent bout of financial market turmoil and soft inflation data have strengthened the case for bolder action, forward-looking survey data and the ECB’s recent lending survey in contrast have been more respectable.
Mr Draghi will nevertheless surely indicate that the door is still open to further easing in the coming months at the post-meeting press conference. Market-based inflation expectations are still far too low for comfort and could become even further unhinged should the oil price continue its descent. Downside risks to the growth outlook have obviously increased as well as a result of the recent financial market instability. Validation of those concerns will still be required, however, via softer growth data before the ECB is likely to act again.
We presently expect further action in Q2 and specifically at the June meeting. By that time we think the growth outlook will have deteriorated and headline inflation will have turned negative again. If, however, the global environment were to worsen by even more than we envisage, there is a reasonable chance that the ECB could act again as soon as March.”
Key Quotes
“Further easing initiatives would probably damage the ECB’s credibility coming so soon after last month’s package of measures. And while the recent bout of financial market turmoil and soft inflation data have strengthened the case for bolder action, forward-looking survey data and the ECB’s recent lending survey in contrast have been more respectable.
Mr Draghi will nevertheless surely indicate that the door is still open to further easing in the coming months at the post-meeting press conference. Market-based inflation expectations are still far too low for comfort and could become even further unhinged should the oil price continue its descent. Downside risks to the growth outlook have obviously increased as well as a result of the recent financial market instability. Validation of those concerns will still be required, however, via softer growth data before the ECB is likely to act again.
We presently expect further action in Q2 and specifically at the June meeting. By that time we think the growth outlook will have deteriorated and headline inflation will have turned negative again. If, however, the global environment were to worsen by even more than we envisage, there is a reasonable chance that the ECB could act again as soon as March.”