Deutsche Bank says that Draghi will get the job done for the ECB to pursue more easing monetary policy
The firm notes that the ECB meeting yesterday reaffirms the notion that we're headed towards a policy easing package in September and believes that Draghi can persuade members of the governing council to deliver on that:
"The latest policy communications were a tale of two halves, however. In a departure from the norm, the Policy Decision statement was used to convey the primary policy message. There was an opportunity for Draghi to reinforce the dovish tone in the press conference, but the Q&A did not achieve this. If anything, the effect was the opposite. In that sense, Draghi has only half delivered on Sintra. He now has seven weeks to convince the Council to keep with him and deliver a strong enough easing package. Given his powers of persuasion, we don't doubt him."
As for the firm's expectations, they have now changed their call of just a 10 bps deposit rate cut this year to a 10 bps rate cut in September (alongside rate tiering) followed by an additional 10 bps rate cut in December.
Meanwhile, they also changed their baseline scenario for September to include QE with the expectation of a €30 billion per month package for a minimum of 9-12 months split evenly between public and private assets.
However, the firm argues that the re-introduction of QE is still a close call and if data/events surprise to the upside in the mean time, the ECB could stall on that decision.
