According to Rabobank analysts, the ECB does not want to under-deliver with its new stimulus to boost inflation expectations.

Key Quotes

“Market’s rate expectations have recently shifted to 40bp cuts in the next 12 months, making it difficult for the ECB to outdo these expectations.”

“Therefore we now think ECB also has to add QE of about EUR 40bn per month for 12 months.”

“A simultaneous announcement in September is likely, with October as potential start date.”

“We believe government bonds will make up for the bulk of purchases. To the extent this is needed to allow for these purchases, the issuer limit is more likely to go than the capital key.”

“Corporate bonds may be included in the purchases, but bank bonds and equities will not.”

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