“The ECB this week can deliver much the same statement as last time including the forward guidance that rates will be left at present or lower levels for an extended period of time”.
“We still believe the threat to cut interest rates will not be followed through, at least not over the next few months, as the data is gradually improving, albeit gradually, and the focus is on SME credit provision scheme coming in the fall”.
“But Draghi’s press conference, while continuing to suggest the second half recovery remains on track, will also continue to keep the threat of interest rate cuts alive”.
“While this would simply maintain the status quo, reinforcing this language can also move the market as EGB yields moved sharply higher on the second half of July and are now right back to where they were for the July 4th meeting that saw the ECB introduce the forward guidance in the first place”.
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