According to analysts at Rabobank, there is some risk of further downgrades to the ECB projections and the scene is set for an announcement of the TLTRO-III modalities.
Key Quotes
“We expect the ECB to set the interest rate at MRO flat, with a potential discount to MRO-20bp.”
“Still, the ECB faces a clear risk of not appearing dovish enough amidst rate cut expectations.”
“Policy rates
- Forward guidance to remain unchanged at “through the end of 2019″.
- In practice, we expect the first deposit rate hike to be delayed until June 2021.
- We don’t expect a tiered deposit rate in the foreseeable future.”
“Asset Purchase Program
- No changes to the reinvestment program or its forward guidance.”
“LTROs
- We expect a decision on the modalities. We look for a base pricing of MRO flat and a discounted rate of MRO-20bp if targets are met.”
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