Analysts at ABN AMRO believe that the ECB will conclude that negative interest rates are currently not having adverse effects on bank lending conditions.
Key quotes
“TLTRO to be priced at -0.4%, while dovish tone should leave door open to further stimulus – The focus of this week’s Governing Council meeting will be on: (i) the details of the TLTRO-III (ii) the ECB’s views on whether action is needed/will be taken to alleviate adverse effects on the banking system of negative rates (iii) how it sees the overall outlook and hints at the prospect of further stimulus in coming months.”
“In addition, a tiered deposit rate is a complicated system given the large variation of excess liquidity across banks in the eurozone.”
“Although revisions to the ECB macroeconomic staff forecasts are likely to be modest (see below), we think that the central bank will sound more concerned about downside risks to the outlook and the tone will be dovish.”
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