Investing.com - Financial Markets Worldwide

ECB: Likely To Keep Rates Unchanged

ByDanske Markets
Published 09/02/2013, 03:21 AM
Updated 05/14/2017, 06:45 AM

There are fewer arguments for a rate cut today than a month ago. The economy is improving faster than the ECB expected, the decline in excess liquidity has slowed, and market rates have come down slightly.

In the current environment, it makes sense for the ECB to keep its powder dry for rainier days. We conclude that the ECB will keep all policy rates unchanged, and not announce any new instruments. Mario Draghi has not really succeeded in convincing the market that the "extended period" forward guidance is a commitment. Maybe, because it isn't. However, we do not expect him to develop the forward guidance further at the current juncture.

The staff projection for GDP growth is likely to be revised up from -0.6% to -0.5% in 2013, and from 1.1% to 1.2% in 2014. The staff projection for inflation is expected to remain unchanged. The ECB meeting is unlikely to rock the markets unless the Governing Council decides on a surprise rate cut. Our bias is for a slight decline in market rates as the ECB is likely to signal that rate cuts are still more likely than rate hikes.

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