EUR: Can The ECB Afford To Avoid A Rate Cut On Thurs? – Credit Agricole

The ECB holds a crucial policy meeting on Thursday. What should investors expect?

Here is their view, courtesy of eFXdata:

Credit Agricole Research discusses its expectations for this week’s ECB policy meeting.

“Contrary to the GFC and the Eurozone crisis however, the ECB has a limited role and limited room of manoeuvre in the current crisis.  We expect it to take targeted measures with limited scope, only to ensure that monetary conditions remain favourable,” CACIB notes.

“In our view,  the most important parts will be two ‘symbolic’ measures: (1)  an increase in the issue and issuer share limit, from 33% to 50% (as proof that the ECB can do QE on the scale it wants to)  and (2)  a refinancing operation with a rate below the deposit rate (as proof that the ECB can do whatever it wants).

We do not think the ECB can afford to avoid a rate cut,  but we expect work on, if not implementation of, further measures to preserve the banking system,” CACIB adds.

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