ECB: Rate cut plus liquidity measures expected – Rabobank

Economists at Rabobank now expect the ECB to show more forceful/specific action at tomorrow’s Governing Council meeting. In addition to a rate cut, liquidity measures are expected as well.

Key quotes

“The situation in Italy has deteriorated so rapidly that we have further adjusted our baseline forecast for Eurozone growth now, taking it down to -0.1% for 2020 from +0.2% previously. This is entirely due to Italy.”

“A 10bp rate cut still stands, as it would be a signal that the ECB is willing to do everything within its mandate.” 

“Whilst we think that a 20bp cut would smack of panic, refraining from a cut altogether would surprise the market negatively.”

“We expect specific liquidity measures to be announced now already while an expansion of the APP is no longer unthinkable, but it’s not our base case for tomorrow.”