Westpac analysts point out that the July ECB meeting met expectations by indicating that the deposit rate is likely to be cut very soon and that other stimulus measures are on the table.
“Concern over still low inflation and a new affirmation on the symmetry of their inflation target — suggest an even greater willingness to ease policy. In that context, the Governing council “have tasked the relevant Eurosystem Committees with examining options” ranging from reinforced forward guidance, a tiered reserves system and new asset purchases.”
“Since July, ECB member Rehn called for a “significant and impactful” package to address concerns over the outlook. Against that, the more hawkish members voiced their opinion that the economy is not weak enough to restart QE.”
“We expect a deposit rate cut at the September meeting and a commitment to restart asset purchases – in our view, sovereign bond purchases of €40bn per month.”