ECB: Moderate risk that the central bank will catch markets off guard next - Wells Fargo

On Thursday, the European Central Bank will have its policy meeting. Analysts at Wells Fargo, expect no change in rates and look for an adjustment to its forward guidance to hint at a near-term rate cut. 

Key Quotes: 

“It is widely expected to keep interest rates on hold. That is our expectation as well, although we look for the ECB to adjust its forward guidance to hint at a near-term rate cut (we expect it will cut its deposit and refinancing rates 10 bps to -0.50% and -0.10%, respectively, in September).”

“At this time, we do not expect the central bank to restart its asset purchase program, although we acknowledge the risks have risen in recent weeks as the Eurozone economy continues to underwhelm.”

“We see a moderate risk that the ECB will catch markets off guard and cut interest rates immediately, rather than waiting to see how the economy evolves between now and September. The ECB has made similarly surprising policy announcements in recent years, and a rate cut (...) would carry strong messaging on the ECB’s commitment to its mandate.”