ECB: First deposit rate hike now seen March 2020 - Wells Fargo
|After today’s meeting, the European Central Bank signaled the first hike probably will not come this year and announced a new package of TLTROs, explained Wells Fargo analysts. They see the terms of the new TLTROs as less favorable for banks, at least compared to prior rounds. According to them, if the Eurozone economy stabilizes as they expect and the ECB eventually raises rates, they would still look for the euro to rise over time.
Key Quotes:
“The ECB made two key policy changes today. First, it pushed back its interest rate guidance to signal the first hike probably will not come this year. It also announced a new package of TLTROs, the terms of which were not as favorable as past offerings. The change in rate guidance was more of a surprise, in our view. In light of this new guidance, we are pushing back our forecast for the first ECB deposit rate hike to March 2020.”
“While the ECB pushed back its rate guidance and announced new loans, this does not strike us as the start of a sustained shift toward easier monetary policy from the central bank. The terms of the new TLTROs are not particularly favorable compared to prior rounds of lending, and there was no talk of a possible rate cut or another round of asset purchases. To be sure, the domestic backdrop in the Eurozone remains challenging, as highlighted by the ECB’s forecast downgrades today. However, we do not see a looming recession for the Eurozone domestic economy, and expect a rebound in activity as the year progresses. If the Eurozone economy stabilizes as we expect and the ECB eventually raises rates, we would still look for the euro to rise over time, even if those eventual euro gains may not come until later this year.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.