The Governing Council of the European Central Bank will meet on Thursday to discuss monetary policy. Analysts at Wells Fargo expect no changes this week and they see that risks around more easing are rising.
“For the past few weeks, confirmed COVID cases have increased significantly, leading to new localized lockdown restrictions. With new lockdown protocol in place across some of the major European countries, the likelihood of renewed pressure on the Eurozone economy is rising.”
“With downside risks to the economy building, we think the ECB will begin to take a more dovish stance on the economy as well as monetary policy. While we are not explicitly forecasting interest rate cuts or an increase to the ECB’s quantitative easing program at this time, we think if confirmed COVID cases continue to rise and economic data deteriorate ECB policymakers would ultimately pursue easier monetary policy. In our view, an increase to its QE program would be more likely than interest rate cuts as rates are already negative.”