The ECB meets this Thursday. The market has an 81% chance of a 25 bp cut in the main refinancing rate priced in. Traders also expect the ECB to offer very long-term funding to European banks with maturities of up to three-years being discussed.
Long-term refis are the ECB’s low-key form of quantitative ease.
All of these moves are trivial compared the ultimate policy shift toward full-scale unsterilized bond-buying that is increasingly expected if the euro-zone is able to come up with a concrete fiscal union.
