Nomura Says ECB Could Cut Rates by 10 Bps

Nomura now looks for the European Central Bank to undertake more monetary accommodation, including a cut in interest rates by early October. The firm describes ECB President Mario Draghi’s recent speech at a Federal Reserve forum in Jackson Hole, Wyo., as more dovish than expected.

Nomura says it now expects the ECB to cut all key interest rates by another 10 basis points by the Oct. 2 meeting at the latest, but adding that a rate cut is more likely as early as the Sept. 4 meeting.

“The main argument for cutting in September would be to demonstrate a quick response to deteriorating inflation expectations and the ECB’s commitment to action in the face of such an event,” Nomura says. Nomura also says that Draghi stepped up expectations of purchases of asset-backed securities.  

“We are now formalizing as part of our base case that the ECB will announce and launch an ABS purchase program by December at the latest, having previously noted a rising probability of outright ABS purchases by year-end,” Nomura says. “We believe the size of the purchase program will be small – between EUR50bn and EUR100bn over a one-year period and that it will exclude mortgage-backed ABS.”

via Kitco

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza