The ECB meets on Thursday amid heightened speculation it will make a new initiative given the deterioration of the two pillars of its monetary policy, money supply and inflation. Most observers have focused on cutting the repo rate 10-25 bp. Others have raised the prospect of a negative deposit rate. Some have also suggested the formal end to the sterilization of the SMP purchases, which involves draining of liquidity. In recent weeks, there has been a noticeable increase in failures to fully neutralize the addition of liquidity provided by the SMP.
Draghi has surprised the markets several times since assuming office and each time it was in a more accommodative direction and tomorrow press conference is going to be another interesting one.
Draghi has surprised the markets several times since assuming office and each time it was in a more accommodative direction and tomorrow press conference is going to be another interesting one.