They think that the markets are under priced for a rate cut and only 5/61 analysts in Bloomberg support a cut. They note that while they didn´t get any hints from Draghi and Coeure´s recent speeches, they can´t say that a rate cut is off the table, although admittedly odds probably lie below 50%.
The ECB is set to slash its own GDP growth forecasts for the coming year and they may also see HICP projections revised lower. The team believe that is the ECB does not cut rates then the HICP forecasts will be key in determining just how dovish the ECB could be going forward. They write, “We may see Draghi suggest that a decision to leave rates on hold was not unanimous, leaving the door open to further rate cuts, once the ECB has more time to debate how best to ease policy further .” Looking to the UK, they note that in contrast, the Bank of England decision should be a non event, with unanimous expectations that the policy rate and the quantity of asset purchases will be left unchanged.