7 Nov 2013
Flash: ECB; what's next? - Rabobank
FXstreet.com (London) - Financial Markets Research at Rabobank said with today’s decision the ECB has again bought itself some time (after all, the last major decision took place in July).
Key Quotes:
“We change our view in the sense that we now expect the ECB will keep their main policy rate at 25bp until, at least, 2015Q1”.
“We stick to our view that there will be a fresh V-LTRO somewhere over the course of 2014, in order to extend and smoothen the liquidity runoff in the system (but are less sure now)”.
“However, as we have argued frequently, there is no immediate pressure to do this. Indeed, with today’s decision to cut the refi rate to 25bp, the effective corridor for money market rates has narrowed. This implies that any liquidity-related spikes in money-market rates are likely to be more limited. What’s more, at the margin, this may also lead banks to hold on to their LTROs for longer (because they have just become 50% cheaper)”.
Key Quotes:
“We change our view in the sense that we now expect the ECB will keep their main policy rate at 25bp until, at least, 2015Q1”.
“We stick to our view that there will be a fresh V-LTRO somewhere over the course of 2014, in order to extend and smoothen the liquidity runoff in the system (but are less sure now)”.
“However, as we have argued frequently, there is no immediate pressure to do this. Indeed, with today’s decision to cut the refi rate to 25bp, the effective corridor for money market rates has narrowed. This implies that any liquidity-related spikes in money-market rates are likely to be more limited. What’s more, at the margin, this may also lead banks to hold on to their LTROs for longer (because they have just become 50% cheaper)”.