ECB: Now is the time for action – Danske Bank

Danske Bank analysts expect the long-awaited ECB meeting on 12 September to set the scene for months and potentially quarters to come.

Key Quotes

“The question is not if the ECB will announce new initiatives but how much it will deliver.”

“We expect the ECB to announce (1) a 20bp cut in the deposit rate (other key rates unchanged) and that the extended forward guidance ('at present or lower...well past the horizon of net asset purchases') will remain; (2) a 12-month QE restart of EUR45-60bn per month, albeit also acknowledging the downside risks given the recent hawkish communications from a few Governing Council members; and (3) a tiering system.”

“The package is not likely to be a silver bullet for markets. The FX market is set to keep its focus on the rate cut, while the fixed income markets focus on the size of QE.”