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ECB Preview: More Stimulus But Not In December

ByDanske Markets
Published 12/03/2013, 07:02 AM
Updated 05/14/2017, 06:45 AM

The ECB will ease again, but in our view the December Governing Council meeting is too early for more stimulus. The latest inflation print showed a small increase, and the ECB is expected to keep the powder dry for future lower inflation figures.

Inflation will still be top of the agenda and we expect Draghi to be dovish and signal that they are ready to act to ensure inflation expectations remain well anchored.

The need for more monetary stimulus is set to be reflected in the ECB's projections. The inflation forecast for 2014 is expected to be lowered to 1.0% and the first release of the 2015 inflation projection should remain far below the ECB's target.

Prominent ECB members have indicated that the ECB has not run out of options. QE and also a small deposit cut have been mentioned as options on the table.

We expect the ECB to refrain from cutting rates further and instead introduce a new 3Y LTRO in Q1, when data for the Asset Quality Review (AQR) has been collected.

We do not believe much is priced in for the ECB meeting in terms of rate cuts or LTRO announcements. In our base case, Draghi will do little else but sound dovish, which should probably be enough to keep rates in check.

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