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28 Mar 2013
Forex Flash: Expect Q2 ECB rate cut - BBH
FXstreet.com (Barcelona) - Brown Brothers Harriman analysts are expecting the ECB to make a rate cut, most likely in Q2.
They write, “We expect the ECB to leave the door open for a cut in its next meeting, but that it will not panic into a move.” They feel that current weakness of the euro-area economy is not unexpected, so the bar for a rate cut is high. However, if, as expected, the weakness is more prolonged, they feel that could lead to a cut. In addition, they add that it might not be growth per se, but the risks of deflation that drives the decision. The team write, “German and French inflation is low and falling. Measured inflation in several other countries has been inflated by administered price and tax increases. Money supply, with Feb figures reported today, continues to trend lower after peaking last Oct, and lending to businesses and households fell for the tenth consecutive month.”
They write, “We expect the ECB to leave the door open for a cut in its next meeting, but that it will not panic into a move.” They feel that current weakness of the euro-area economy is not unexpected, so the bar for a rate cut is high. However, if, as expected, the weakness is more prolonged, they feel that could lead to a cut. In addition, they add that it might not be growth per se, but the risks of deflation that drives the decision. The team write, “German and French inflation is low and falling. Measured inflation in several other countries has been inflated by administered price and tax increases. Money supply, with Feb figures reported today, continues to trend lower after peaking last Oct, and lending to businesses and households fell for the tenth consecutive month.”