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In the view of the Nomura Research Team, the European Central Bank (ECB) is likely to stand pat at its monetary policy meeting due this Thursday. The bank, however, could offer hints on the negative inflation and euro’s surge.

Key quotes

“We expect the ECB to address the recent euro area negative inflation print and the euro’s appreciation.

ECB is unlikely to act on disappointing inflation yet, but we think that if the ECB decides to do so, the PEPP, rather than rates cuts, would be the preferred instrument.

The benefits that a 10bp rate cut would bring to inflation at these levels are marginal, notwithstanding its beneficial impact on the euro.”