ECB: a rate cut is the most likely outcome in the upcoming meeting | Eurobank
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ECB: a rate cut is the most likely outcome in the upcoming meeting

• The ECB will most likely cut its main policy rate by 25bps to 0.5% in the upcoming meeting on the backdrop of ongoing economic weakness in both periphery and core countries and well anchored inflation expectations.
• However, conventional monetary easing is unlikely to have a meaningful impact on the euro area economy. In periphery countries, a lower policy rate is unlikely to translate into lower lending rates due the broken monetary transmission mechanism. In core countries, money market rates are unlikely to move substantially due to abundant liquidity.
• The periphery needs targeted unconventional monetary measures to overcome the credit crunch. However, in the current economic and political context it is easier to build consensus for a rate cut than for credit easing measures that entail a distribution of credit risk.