Another ECB preview: 20bp rate cut, tiering, restart QE (of 30bn euro per month)
Earlier previews can be found here:
Except this one ...
Adding this now, via ING:
- According to estimates Lane presented, the ECB's unconventional measures since 2014 had lifted both growth and inflation some 0.5 percentage points higher. Interestingly, almost half of the impact came from QE. Don't forget that when the ECB started QE in 2015, the staff projections predicted an acceleration of inflation from 0.5% in 2014 to 1.3% in 2016. Currently, the risk of dropping from an environment of de facto economic stagnation and low inflation into deflation is probably as high as in 2014/5.
- Therefore, we continue to see the ECB starting a final monetary firework at this week's meeting: a 20bp rate cut of the deposit rate, a small tiering system, a repricing of the TLTROs and a restart of QE with some 30 billion euro per month. Even though there is the risk that the hawks' opposition could lead to a delay of QE.
A bit of warning there on possible QE delay … that'd fuel the EUR ….