ECB: Market overestimating the possibility of an increase in the deposit rate - Natixis

According to the analysts at Natixis, the market is overestimating the possibility of an increase in the ECB’s deposit rate after Nowotny’s recent comments (40% probability of an increase in the deposit rate for end-2017).

Key Quotes

“We do not believe the ECB will touch the deposit before the end of the asset purchase programme, as it states in its official press release. The expected changes will be: June, change to the official press release with the removal of the downward bias for interest rates; September: announcement of a reduction in the purchases from €60bn to €40bn from January 2018, with a reassessment of the situation in March.”

“Our central scenario is therefore for a final end to the asset purchase programme in mid-2018, with an increase in the deposit rate in end-2018, and in the repo rate in early 2019.”