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#1 11-07-2019 16:53:18

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USD: the minutes of the last ECB meeting confirm idea of a rate cut

USD: the minutes of the last ECB meeting confirm idea of a rate cut soon (Nordea)

According to Nordea Markets, the ECB minutes published today at 13:30 continued to prepare the ground for further easing, but Coeuré, an ECB member, downplayed the role of market-based inflation expectations, which supports the idea that they will not rush to a decision.

"At the June meeting, the ECB published both the terms and conditions of the TLTRO IIIs and extended the guidelines to the first half of next year. The minutes indicate that both decisions received broad support among the Board of Directors.

The Governing Council seems to have come out in favour of a more flexible monetary policy than the decision indicates.

As Draghi mentioned at the press conference following the meeting, there were also discussions on the prospects for further rate cuts and the resumption of net asset purchases.

Thus, we continue to expect that, in the current macroeconomic environment of high uncertainty and inflation well below target, the ECB will launch a new set of stimulus measures in 2 months.

On 11 July, Coeuré also delivered a speech in which he illustrated the various recent developments in market-based inflation expectations and household expectations.

According to Benoit Coeuré, much of the recent decline in long-term market analysis is due to changes in market risk premiums and low expectations about inflation.

Benoit Coeuré's analysis also indicates that very low market-based inflation expectations are not the only valid reason why the ECB proposed a new set of easing measures at this month's meeting. We therefore assume that the ECB will only launch a new stimulus package in 2 months, when the ECB publishes new macroeconomic projections.

"Anything worth having is worth going for - all the way." - J.R. Ewing



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