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ECB Preview: Plenty of ammunition left

Wed, Dec 3 2008, 15:08 GMT
by Søren Dijohn

Danske Bank A/S


Overview: We are looking for the ECB to lower its key rate by 75bp at the meeting December 4 - anything less would be a disappointment. Business confidence has collapsed, upside risk to price stability has - in our view - evaporated, and there is plenty of firepower left in the ECB arsenal. The new Staff projection should include sizeable downward revisions to both the growth and inflation forecasts for 2009, and this could form the perfect basis for the ECB to cut rates aggressively on Thursday and over the coming months. We do, however, see a substantial risk that the ECB will only deliver a 50bp cut. In our view this is just postponing the inevitable, and we believe the bank will lower rates to 1.5% before the end of Q1 09.

Published on  Wed, Dec 3 2008, 15:11 GMT


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Danske Bank  | Holmens Kanal 2-12, DK-1092 Copenhagen
http://www.danskebank.com/ | danskeresearch@danskebank.com

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