By Steve Goldstein, MarketWatch
If there’s one thing that observers agree on with respect to Thursday’s European Central Bank meeting, it’s that policy makers will announce a series of loosening measures that won’t really make much of a difference to the struggling European economy.
The ECB will announce its decision at 1:45 p.m. local time (7:45 a.m. Eastern), followed by a news conference with President Mario Draghi at 2:30 p.m. Economists at Goldman Sachs said most of the measures will be revealed in the announcement, rather than the Draghi press conference.
“Failure to act now when the inflation outlook is weakening and, especially, not using the most effective instrument (QE), would signal a remarkable change in ambition,” said Anatoli Annenkov, an economist at Société Générale, referring to quantitative easing, which the ECB could restart by resuming monthly bond purchases.
The latest data, from August, shows inflation running a full percentage point below its target of nearly 2%. At the same time, the eurozone economy is just limping along, with year-over-year growth of 1.1% in the second quarter.
Here’s a look at what banks are expecting out of the ECB.
|Bank of America Merrill Lynch||20 bp deposit rate cut, tiering, QE of 30 billion euros per month for 9-12 month|
|BNP Paribas||10 bp deposit rate cut, rate tiering, strengthening forward guidance, relaxing TLTRO condition, QE of 50 billion euros per month|
|Deutsche Bank||10 bp deposit rate cut, forward guidance change, QE of 30 billion euros per month for 12 months, removing 10bp margin from TLTRO3 borrowing costs, reserve tiering|
|Goldman Sachs||20 bp deposit rate cut, forward guidance extension, QE of 200-250 billion total|
|ING||20 bp deposit rate cut, dovish rate guidance, QE of 30 billion euros per month for 9-12 months|
|TD Bank||20 bp deposit rate cut, QE of 40 billion euros per month, forward guidance to either capping rates through middle of 2021 or link hikes to inflation outcome|
|Nomura||10 bp deposit rate cut, QE of 30 billion euros per month until end of 2020, forward guidance change, rate tiering|
|SocGen||20 bp deposit rate cut, QE of 40 billion euros per month, rate tiering|
|JPMorgan||10 bp rate cut, QE of 30 billion euros per month, extension of forward guidance|
This month, U.S. /zigman2/quotes/210598065/realtime DJIA +0.32% and European stocks /zigman2/quotes/210599654/delayed XX:SXXP +0.09% have both added about 2%. Eurozone banks /zigman2/quotes/210599387/delayed XX:SX7E -0.22% have done particularly well over the last week. The euro /zigman2/quotes/210561242/realtime/sampled EURUSD -0.0718% has also crept higher against the dollar.
The yield on the 10-year bund /zigman2/quotes/211347112/realtime BX:TMBMKDE-10Y -6.83% has climbed from -0.7% earlier in the month to -0.56%.