Danske Bank analysts point out that the ECB yesterday joined the camp of central banks looking at easing monetary policy to fend off moderation in economic growth and declining inflation expectations.
Key Quotes
“At the meeting the ECB extended its forward guidance to “at present levels at least through H1 2020″ and Draghi also acknowledged on the subsequent press conference that a possible rate cut or restart of QE as a contingency tool had been discussed at the meeting.”
“Yet, it was not as dovish as expected by markets given the market pricing of an almost 50/50 chance of a 10bp cut already in September. As a result, the EUR/USD and the front-end of the euro curve moved higher. The announced TLTRO3 modalities were broadly as expected.”
“The new staff projections were broadly unchanged, leading to an unchanged baseline narrative, although the external environment posed a more prominent risk than previously. Markets are still pricing a 10bp rate cut by summer next year.”
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