The improved but still bleak economic outlook, lower inflationary risks and new euro crisis uncertainty since the Italian elections have given rise to new speculation about a possible ECB rate cut this week. True, a downward revision of the inflation outlook could open the door to a rate cut a bit further. However, new political uncertainty is rather an argument against than for a rate cut. We expect the ECB to keep rates on hold on Thursday. We might even see a tactical shift, with the ECB moving from “attack is the best defence” to good old Italian-style catenaccio, with a well-organised defence forcing the other team to take the initiative.
Find ING's ECB preview here: http://bit.ly/YOVfae