ECB sources: The possibility of interest rate cut may be higher than expected
Reports from European Central Bank sources show that policy makers are not excluding lower interest rates at all. A week after their no-nonsense …
Reports from European Central Bank sources show that policy makers are not excluding lower interest rates at all. A week after their no-nonsense meeting, where they did not make a change in the policy ground, ECB officials said to be stated that the market actually underestimated the possibility of a new rate cut, increasing the possibility of the Bank to evaluate deeper negative interest rates as well as additional asset purchases. As recession pressures increase as a result of increased quarantine measures and large economies such as Germany pull down their growth projections, the strengthening of the EUR exchange rate increases the pressure on the economy. The trend remains weak, both in terms of inflation and growth.
Interest projections on the Bloomberg screen predicted a 5 basis point cut in the period up to the end of the year (presumably October and after). Europe, Japan, Switzerland and Denmark now remain as central banks charging negative rates. The deepening of negative interest rates has been an issue that countries with high savings rates, especially Germany, opposed so far, in order not to damage bank profitability.
It is a situation to be expected that the ECB will make an additional easing move due to the increasing economic uncertainties and the strengthening EUR pressure. At this stage, it will be necessary to add interest rate cuts to additional asset purchases. While the deposit rates are already at the level of -0.50%, making it more negative can have an accelerating effect on deposit outflow for the banking sector. Prior to the Fed, the net EUR will have a negative effect.
Kaynak Tera Yatırım
Hibya Haber Ajansı
