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3 Mar 2014
Flash: ECB; a very fine balanace
FXStreet (Guatemala) - Strategists at Rabobank explained in the February press conference ECB President Draghi said that the “complexity of the situation” had withheld the Governing Council from taking action and that the ECB needed more information. "A run down ‘Draghi’s checklist’ certainly doesn’t tick all the boxes yet".
Key Quotes:
"Moreover, because any remedial action would suffer from certain inefficiency or implementation problems (let alone adverse side-effects and potential legal challenges in some cases), this implies that the outcome of this week’s ECB meeting will be a very close call".
"If the ECB does take action, its steps are likely to be incremental. ‘Signalling value’ will be an important element. We stick with our view that liquidity and/or collateral measures are the most likely at this juncture because they enjoy the best short-term cost/benefit ratio, although we certainly don’t rule out a small cut in the refinancing rate".
"For now, the deflationary threat is insufficient for the ECB to roll out its heaviest artillery".
Key Quotes:
"Moreover, because any remedial action would suffer from certain inefficiency or implementation problems (let alone adverse side-effects and potential legal challenges in some cases), this implies that the outcome of this week’s ECB meeting will be a very close call".
"If the ECB does take action, its steps are likely to be incremental. ‘Signalling value’ will be an important element. We stick with our view that liquidity and/or collateral measures are the most likely at this juncture because they enjoy the best short-term cost/benefit ratio, although we certainly don’t rule out a small cut in the refinancing rate".
"For now, the deflationary threat is insufficient for the ECB to roll out its heaviest artillery".