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30 Nov 2015
ECB to cut the deposit rates by 10bps - Nomura
FXStreet (Delhi) – Research Team at Nomura, suggests that with a few more dovish public appearances from Draghi has led the research house to change their call on the ECB from an extension of QE to then incorporate a 10bp Depo rate cut as well.
Key Quotes
“The discussion around the ECB’s lower bound was thought to have been answered in the very first question of the September 2014 press conference after the ECB had cut the deposit rate to -0.20% where, for all intents and purposes, the ECB was now at the lower bound, where technical adjustments are not going to be possible any longer.
However, at the recent October 2015 conference, Draghi opened the door again to further rate cuts with “Further lowering of the deposit facility rate was indeed discussed, and it's one of the instruments of monetary policy that I referred to when I said all instruments have been discussed.”
Our clients have followed suit. In our survey prior to the October ECB meeting, only 9% were calling for a deposit rate cut. This now stands at a strong 75% of the survey, with 59% expecting a 10bp deposit rate cut and 33% expecting even more with a lower bound of around -0.50%, which suggests that expectations for further ECB easing will sustain after a 10bp cut.”
Key Quotes
“The discussion around the ECB’s lower bound was thought to have been answered in the very first question of the September 2014 press conference after the ECB had cut the deposit rate to -0.20% where, for all intents and purposes, the ECB was now at the lower bound, where technical adjustments are not going to be possible any longer.
However, at the recent October 2015 conference, Draghi opened the door again to further rate cuts with “Further lowering of the deposit facility rate was indeed discussed, and it's one of the instruments of monetary policy that I referred to when I said all instruments have been discussed.”
Our clients have followed suit. In our survey prior to the October ECB meeting, only 9% were calling for a deposit rate cut. This now stands at a strong 75% of the survey, with 59% expecting a 10bp deposit rate cut and 33% expecting even more with a lower bound of around -0.50%, which suggests that expectations for further ECB easing will sustain after a 10bp cut.”