ECB facing a clear risk of not appearing dovish - Rabobank

According to analysts at Rabobank, there is some risk of further downgrades to the ECB projections and the scene is set for an announcement of the TLTRO-III modalities.

Key Quotes

“We expect the ECB to set the interest rate at MRO flat, with a potential discount to MRO-20bp.”

“Still, the ECB faces a clear risk of not appearing dovish enough amidst rate cut expectations.”

“Policy rates

• Forward guidance to remain unchanged at “through the end of 2019”.
• In practice, we expect the first deposit rate hike to be delayed until June 2021.
• We don’t expect a tiered deposit rate in the foreseeable future.”

“Asset Purchase Program

• No changes to the reinvestment program or its forward guidance.”

“LTROs

• We expect a decision on the modalities. We look for a base pricing of MRO flat and a discounted rate of MRO-20bp if targets are met.”