Its European Central Bank policy meeting day – preview

ECB monetary policy decision is coming later on Thursday 12 September 2019

  • announcement due at 1145gmt
  • ECB President Draghi’s press conference (his last one!) is at 1230 GMT
Various previews have been posted in past days, I’ll collate them all for easy reference a little later. But for now, BNZ have a handy summary:
  • consensus among economists is for a 10bp cut to the ECB’s deposit rate and the announcement of a resumption to QE, with the median estimate for a €30b per month pace of bond buying. 
  • The market prices 14bps of rate cuts in for this meeting, implying an almost 50% chance that the ECB could cut by 20bps. 
  • The ECB is widely expected to accompany any rate cut with the adoption of a “tiering” system for bank reserves, whereby some portion of banks’ reserves will be exempted from the negative deposit rate, in order to mitigate the negative financial impact on the banking sector. 
  • The bond market’s focus is likely to be on whether the ECB restarts its QE programme and, if so, what the size of such a programme might be. Despite the recent rise in European and global rates, expectations for the ECB are still high (as evidenced by a 30 year German yield of 0%) and were it to disappoint market expectations on QE, the risk is for an extension in the recent bond sell-off.
ECB monetary policy decision is coming later on Thursday 12 September 2019