11 Nov 2015
ECB: Next round of easing to be a QE extension - Nomura
FXStreet (Bali) - Nick Matthews and Anna Titareva, Economists at Nomura, expect the next round of easing by the ECB to be a QE extension, although highlight the risk for more aggressive easing with an increase in the monthly purchase pace (to €70bn per month) and/or a 10bp deposit rate cut on 3 December a close call.
Key Quotes
"The ECB will re-examine the degree of monetary policy accommodation on 3 December. After the October meeting (see Post ECB meeting, 22 October), we brought forward our expectation of when the ECB will act to 3 December having flagged increasing risks of an earlier move."
"With inflation taking longer to recover than the ECB initially expected, we continue to expect QE to be extended by at least six months to “end March 2017, or beyond” (with removal of the date-based guidance to reinforce its open-ended design also an option for the ECB). President Draghi has confirmed that further deposit rate cuts are possible (as we noted in GEOM (13 October 1205%), “…the ECB is not excluding further interest rate cuts…”)."
"However, while we still expect the next round of easing to be a QE extension, the risk to our forecast is for more aggressive easing, with an increase in the monthly purchase pace (to €70bn per month) and/or a 10bp deposit rate cut on 3 December a close call."
"Risks: We continue to view slower foreign demand as the main downside risk, as (geo)political risks have reduced. Upside risks to our euro area outlook stem from a stronger impact of policy measures on domestic demand than we currently expect."
Key Quotes
"The ECB will re-examine the degree of monetary policy accommodation on 3 December. After the October meeting (see Post ECB meeting, 22 October), we brought forward our expectation of when the ECB will act to 3 December having flagged increasing risks of an earlier move."
"With inflation taking longer to recover than the ECB initially expected, we continue to expect QE to be extended by at least six months to “end March 2017, or beyond” (with removal of the date-based guidance to reinforce its open-ended design also an option for the ECB). President Draghi has confirmed that further deposit rate cuts are possible (as we noted in GEOM (13 October 1205%), “…the ECB is not excluding further interest rate cuts…”)."
"However, while we still expect the next round of easing to be a QE extension, the risk to our forecast is for more aggressive easing, with an increase in the monthly purchase pace (to €70bn per month) and/or a 10bp deposit rate cut on 3 December a close call."
"Risks: We continue to view slower foreign demand as the main downside risk, as (geo)political risks have reduced. Upside risks to our euro area outlook stem from a stronger impact of policy measures on domestic demand than we currently expect."