PARIS (MNI) – Financial market analysts who listened to Mario
Draghi today agreed that while the ECB chief sought to keep maximum
pressure on Eurozone politicians by withholding any new accommodative
measures for now, he also left the door open for cutting official
interest rates sometime in the not-too-distant future.

His concession that some Governing Council members had argued in
favor of a rate cut at today’s monetary policy meeting clearly put it
back on the table.

In addition to pressuring politicians to quell the crisis by moving
more quickly towards fuller integration, the ECB probably also wanted to
wait for the outcome of the Greek elections on June 17 and the EU
leaders’ summit on June 28-29 before making any decision on new
measures.

Excerpts of analysts’ comments follow:

CEDRIC THELLIER, Natixis: “As expected, President Draghi’s tone was
quite much dovish both about inflation and GDP growth. While we still
favour a long-lasting status quo at 1% for the refi rate, a further rate
cut over the months to come is now much more likely than one month ago.
Indeed, we guess President Draghi tried once again to save time and
ammunition in case of an unfavourable outcome from the Greek elections
on 17 June and European Summit on 28 June. Then, further support from
the ECB might be necessary (3rd VLTRO, SMP expansion, rate cuts),
probably as soon as in July.”

VIOLA JULIEN, Helaba: “The ECB is keeping all doors open. Draghi
pointed to the need for action if the situation should worsen. Overall,
markets have been somewhat disappointed in a first reaction. Germany’s
DAX stock market index has fallen quite significantly and the euro has
been hit as well. There were no massive surprises in today’s press
conference. In principle, an interest rate cut by the ECB today would
have only been an adaptation to the reality, because money market rates
have quite markedly fallen already. Thus, a rate cut by the ECB probably
would not have had a larger effect. Still, markets are waiting for the
ECB to undertake some growth-stimulating measures.”

RAINER SARTORIS, HSBC Trinkaus: “The ECB is keeping its cards close
to its chest. It became somewhat clear that their worries have risen.
The ECB is keeping a door open for a rate cut or another LTRO. But one
could not read into today’s press conference that the bank will move
fast on this. What one could read between the lines quite well is that
the ECB does not think it is the one that has to make the next move but
rather that politicians have to make not only one but many moves to
contain the crisis.”

CARSTEN BRZESKI, ING: “A much more cautious Draghi but unchanged
staff projections seemingly shows a divergence in views between ECB
staff and the Governing Council. In regards to the future path of
monetary policy, Draghi kept a very low profile. If at all, and
admittedly with some goodwill, Draghi very gently opened the door for a
future rate cut…Remember that the ECB has never used code words to
hint at future rate cuts, only rate hikes. However, back in October last
year, former president Trichet had prepared the grounds for Draghi’s
November rate cut by stating that a rate cut had been discussed….The
ECB wants to keep maximum pressure on Eurozone politicians. Draghi’s
comment, that it was not the ECB’s task to fill other institutions’ lack
of action, was very clear. In our view, even if Draghi today denied that
there was a quid-pro-quo, it is hard to believe that the ECB would
really stay on the sidelines when push comes to shove. Too much is at
risk. However, at least for the time being, today’s press conference was
a clear signal that ECB is tired of pulling the chestnuts out of the
fire for Eurozone politicians.”

MARIO GRUPPE, Norddeutsche Landesbank: “Draghi did not sound today
as if the ECB would move quickly on interest rates. But in my view,
everything hinges on Greece. I think the ECB simply wants to wait for
the election result there and its implications. The ECB deliberately
made the decision not to act today in order to have leeway in case
monetary policy steps become necessary after the Greek elections.”

TORGE MIDDENDORF, WestLB: “I think that the statement and what
Draghi said in the following statement hints at a possible rate cut
already in July. First of all, the statement changed slightly. Now the
ECB is aware of increased downside risks to the economic outlook. So
they strengthened the downside risks somewhat in the statement. Second,
when they are talking about inflationary pressures, they are saying that
the underlying price pressures should remain subdued, whereas in the
past, they just said that the underlying price are limited. Thirdly,
Draghi hinted at some Council members already voting for a rate cut
today. So, all in all, we think there will be a rate cut taking place in
July. So the rate cut was postponed, but not cancelled. It is only a
matter of when.”

MICHAEL SCHUBERT, Commerzbank: “In our view, the ECB’s growth
outlook is still too optimistic, as we expect -0.4% growth in 2012, and
0.5% in 2013. Therefore, we stick to our forecast that the ECB will
probably cut the refi rate in coming months to 0.75%. Another reason for
the bank not cutting rates today was possibly that the ECB sees current
market tensions as a way of focusing politicians’ minds on reform
efforts.”

MARCO VALLI, Unicredit: “The ECB remains in wait-and-see mode, but
with a clear bias towards further policy easing (both conventional and
unconventional) if hard data start weakening visibly and/or the
transmission mechanism deteriorates further. In July, after the Greek
elections, the EU summit and another round of macroeconomic data, the
central bank will certainly have more information at hand to refine its
assessment.”

KEN WATTRET, BNP Paribas: “The data flow is increasingly signalling
that the ECB’s scenario of a gradual return to growth over the course of
this year is going off track – and it’s not just the survey data. The
recent ‘hard’ activity data releases have also been disappointing. So
why the inertia from the ECB? In part, it reflects a desire to play for
time to ascertain whether the deterioration in activity data is due to
high uncertainty or reflects more fundamental issues. But it probably
also reflects a preference to wait until some key political events have
taken place, including the elections in Greece on 17 June and the EU
summit at the end of this month….All things considered, therefore, we
see the no-change decision today as merely a postponement of the
inevitable. As such, we forecast a 25 bp cut in the refinancing rate to
0.75% at the next scheduled opportunity on 5 July. Our target for the
refi rate of 0.5% by end-Q3 remains intact.”

–Paris newsroom, +331-42-71-55-40; paris@marketnews.com

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