FXstreet.com (Barcelona) - So that its liquidity operations remain effective, the ECB is expected to ease collateral requirements soon, also to set the stage for a possible LTRO around year-end. A new LTRO operation isn’t, however, the baseline scenario of Merryll Lynch analysts. “Given banks’ funding requirement, we believe this cash would be used for funding rather than sovereign bond purchases, especially now that the ECB has a new bond buying scheme and may be supervising banks as early as 2013”, wrote analysts Laurence Boone and Ralf Preusser, that also expect a 25bp rate cut (no negative deposit rate) as the macro-economic outlook deteriotates significantly.
Believing the ECB will bring its projections in line with consensus (growth -0.5% in 2012, +0.3% in 2013; inflation 2.3% in 2012, and just above 1.6% in 2013), still more bullish than the analysts’ forecast, the refi rate cut is viable: “We therefore believe the ECB will cut the refi rate by another 25bp, leaving the deposit rate unchanged”, they added.
Believing the ECB will bring its projections in line with consensus (growth -0.5% in 2012, +0.3% in 2013; inflation 2.3% in 2012, and just above 1.6% in 2013), still more bullish than the analysts’ forecast, the refi rate cut is viable: “We therefore believe the ECB will cut the refi rate by another 25bp, leaving the deposit rate unchanged”, they added.
