ECB: A crucial important meeting – Wells Fargo

On Thursday, the European Central Bank will have its meeting. Analysts at Wells Fargo, expect a rate cut from -0.40% to -0.50%, in line with market consensus. 

Key Quotes: 

“The European Central Bank (ECB) will meet next week in what is likely to be a crucially important meeting. The Eurozone economy has continued to tread water, with decent service sector data offset by a mightily struggling manufacturing sector. Thus far, these two forces have acted as roughly balanced counterweights, keeping the Eurozone economy out of a recession and allowing the ECB to stay on the sidelines. As more time has passed without a rebound, however, monetary policymakers have grown increasingly uneasy, particularly as political risks related to Brexit and Italy have reared their heads.”

“Our expectation is that the ECB will cut rates 10 bps and restart its QE program. Specifically, we expect the ECB to buy €45 billion a month in sovereign bonds for the next 12 months. Recent pushback against restarting QE from some ECB officials, however, makes the second portion of this forecast more uncertain than the first.”