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21 Apr 2016
ECB: Door for additional rate cuts not completely closed - Danske
According to analysts from Danske Bank, the European Central Bank did not close the doors to more rate cuts but it is likely to prefer other instruments over rates to boost the economy and inflation.
Key Quotes:
“The main message from today’s ECB meeting was that the ECB is in implementation mode, as Draghi said the ECB policies are working but must be given time. Regarding the immediate need for additional easing, Draghi concluded that broad financing conditions have indeed improved, which supports our view that the ECB will remain side-lined in the coming months. This should be the case, even though Draghi said the ECB ‘will continue to monitor closely the evolution of the outlook for price stability and, if warranted to achieve its objective, will act by using all the instruments available within its mandate’.”
“Overall, we conclude that the door for additional rate cuts is not completely closed, but we still expect the ECB to prefer other instruments over rates. We expect the ECB will remain on hold over the coming months while it waits to see the effects of its recent policy initiatives.”
“From a longer-term perspective, we believe the ECB will extend the QE purchases beyond March 2017. This should occur as inflation in our view will not pick up sufficiently for the ECB to remain on hold. We do not expect additional rate cuts, but a strong appreciation of the effective euro could force the ECB to cut again.”
Key Quotes:
“The main message from today’s ECB meeting was that the ECB is in implementation mode, as Draghi said the ECB policies are working but must be given time. Regarding the immediate need for additional easing, Draghi concluded that broad financing conditions have indeed improved, which supports our view that the ECB will remain side-lined in the coming months. This should be the case, even though Draghi said the ECB ‘will continue to monitor closely the evolution of the outlook for price stability and, if warranted to achieve its objective, will act by using all the instruments available within its mandate’.”
“Overall, we conclude that the door for additional rate cuts is not completely closed, but we still expect the ECB to prefer other instruments over rates. We expect the ECB will remain on hold over the coming months while it waits to see the effects of its recent policy initiatives.”
“From a longer-term perspective, we believe the ECB will extend the QE purchases beyond March 2017. This should occur as inflation in our view will not pick up sufficiently for the ECB to remain on hold. We do not expect additional rate cuts, but a strong appreciation of the effective euro could force the ECB to cut again.”