ECB Preview: Operating in the twilight zone – Rabobank

Economists at Rabobank do not expect the ECB to follow up with new stimulus at Thursday’s meeting but the ECB probably cannot escape more action later in the year.

Key quotes

“We identify two key risks that could force the ECB to undertake more monetary stimulus. Firstly, a further worsening of the Eurozone economy could require a stronger policy response. Secondly, the previously announced measures have not fully alleviated market stress.” 

“The ECB’s recent decision to implement asset purchases and discounted (T)LTROs over a rate cut has lowered our conviction of further deposit rate cuts.” 

“With the heightened threshold for new rate cuts, we expect two more deposit rate cuts, bringing it to -0.70%. This is one cut less than we previously expected as the ECB’s concerns about side-effects appear bigger than we thought.”