ECB: Risks towards cutting 10-20bps – ANZ

The ECB  has limited room to cut but has not yet reached the reversal rate. Cutting on the deposit rate and enhanced TLTRO III liquidity is likely, in the opinion of economists at ANZ Research. Equity markets have fallen and the euro has appreciated.

Key quotes

“Economy to barely grow by 0.2% in 2020 as a mid-year recession is possible. Broad disruptions seem likely as the virus spreads. Services are likely to take a hit, as consumer spending slows, near term.”

“The ECB will guard against fragmentation undermining the fragile credit recovery. Risks are skewed towards the ECB cutting another 10-20bps.”