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- ECB signals further stimulus is on its way – Danske Bank
ECB signals further stimulus is on its way – Danske Bank
Danske Bank's analysts note that at yesterday's meeting Mario Draghi sent a strong signal to the market that further stimulus is on its way to help the ailing economy.
- “As we expected, the ECB adjusted the forward guidance as a first step, opening up the possibility of policy rates remaining 'at present or lower levels' at least through H1 20. In our view, this has set the scene for a deposit rate cut, which we expect to be announced at the September meeting (we expect a 20bp rate cut), paired with a restart of the QE programme and extended forward guidance. Markets are currently pricing 12bp of cut in September.
- The ECB's assessment of the inflation and economic outlook and risks was broadly unchanged. While resilience is still apparent in the service and construction sectors, Draghi stressed the outlook was getting worse and worse, especially in manufacturing. This means the expected rebound in H2 19 is now less likely with incoming data. The risk of recession was seen as 'pretty low' (from 'very low' in June).”
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