Tuesday, April 2, 2013

ECB preview

The latest drop in confidence indicators, the aftermath of the Cyprus crisis and lower inflationary risks could provide the ECB with an excellent justification to cut rates this week. However, in our view, the ECB will again resist the temptation and keep rates on hold on Thursday. The ECB’s main concern is not the absolute level of its policy rate but the continued fragmentation of bank lending rates, particularly for SMEs. However, up to now, the ECB has not been able to come up with a technically – and politically – acceptable bazooka to boost lending to SMEs. In fact, when assessing possible policy options to stimulate the economy, the ECB faces a new dilemma: choosing a rather ineffective but politically acceptable rate cut or an effective but politically controversial lending bazooka.

Read here ING's ECB preview:

No comments:

Post a Comment