ECB to cut its deposit rate by 10bp in March - ABN AMRO

In a recently published article assessing the European Central Bank's monetary policy outlook, "We now expect the ECB to cut its deposit rate by 10bp in March, rather than in December," said ABN AMRO's Head of Financial Markets Research, Nick Kounis, and Senior Economist, Aline Schuiling. "Our base case remains that the central bank will step up net asset purchases to EUR 40bn from April onwards, with the decision also likely at the March Governing Council meeting"

Key quotes

"The case for the ECB to delay the deposit rate cut to March rests on a number of pillars. First of all, the Governing Council may want to have more information about the impact of September’s rate cut given concerns about the adverse impact of more deeply negative interest rates. Second, GDP growth slightly exceeded the ECB’s expectations in Q2, while it may also judge that downside risks related to the trade conflict and a hard Brexit have eased somewhat. Third, it is Christine Lagarde’s first monetary policy meeting as President and she will be leading a divided Governing Council."

"Nevertheless, the case for further monetary stimulus remains strong in our view. At the September Governing Council meeting, the ECB staff published forecasts showing that inflation would be at just 1.5% by the end of 2021, which is not consistent with the price stability goal."

"So the December projection for inflation in 2021 will still show 1.5% – at best. Indeed, recently the European Commission published new forecasts showing it expected inflation to be 1.3% at the end of 2021. The ECB may try to window dress the situation – as it has done in the past – by publishing a more bullish forecast for the following year. Indeed, in December, the ECB will for the first time publish projections for 2022. However, this strategy is losing credibility and this is reflected a disanchoring of various measures of inflation expectations. Finally, we continue to see GDP growth and inflation disappointing current ECB estimates."

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.

Feed news

FXStreet Trading Signals now available!

Access to real-time signals, community and guidance now!

Latest Forex News

Latest Forex News

Editors’ Picks

EUR/USD extends losses toward 1.1250 amid coronavirus concerns

EUR/USD is trading closer to 1.1250 as concerns about US coronavirus cases are growing. Eurozone finance ministers are meeting ahead of next week's summit.  US PPI and updated COVID-19 statistics are awaited.


GBP/USD pressured under 1.26 amid risk-off mood, Brexit uncertainty

GBP/USD is trading below 1.26, off the highs. Rising US coronavirus cases are pushing markets lower and the safe-haven dollar higher. Concerns about Brexit and the UK refusal to participate in the EU coronavirus vaccine scheme are weighing on sterling. 


Gold refreshes session tops, moves back above $1800 mark

The prevalent risk-off mood assisted gold to reverse an early dip to the $1796 region. A modest pickup in the USD demand might cap any further gains for the commodity. Investors also worried about the possibility of further escalation of Sino-US tensions.

Gold News

Canada Net Change in Employment June Preview: June is looking better and better

Job gains expected to more than double in June. Unemployment rate to drop to 12% from 13.7 in May. Ivey PMI was twice its forecast in June, highest since Nov 2019. USD/CAD would benefit from better June job figures.

Read more

WTI drops to fresh weekly lows below $39 amid virus risks, IEA forecast

WTI (August futures on Nymex) extends the steep declines seen on Thursday to drops over 1.50% in the European session this Friday. The oil bears breach the 39 level to hit the lowest levels in eight days at 38.76.

Oil News