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ECB: Preview of meeting on 6 November

Wed, Nov 5 2008, 17:28 GMT
by Søren Dijohn

Danske Bank A/S


Overview: The ECB is facing several of its risk scenarios. The outlook for growth has deteriorated markedly and the inflation outlook is increasingly favourable. We expect it to respond with a 50 bp lowering of policy rates at the meeting on Thursday. The market is pricing a total of 125bp in cuts over the coming nine months, which is in line with our forecast. However, the market is more front loaded in its pricing, with close to 75bp priced for Thursday, and a total easing of 100bp priced by December. Hence we see some risk that the November and December Eonia rates could rise.

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

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