HALISTER1: Case for ECB Easing Builds Further After Euro-Area CPI: ABN Amro

Case for ECB Easing Builds Further After Euro-Area CPI: ABN Amro

(Bloomberg) -- Euro zone’s weak CPI data adds to the already strong case for ECB to significantly step up stimulus, ABN Amro economist Nick Kounis writes in e-mailed comments.
  • Expects headline CPI to probably remain stuck in negative territory in near term
  • Weakening EUR is the only way to get core inflation up significantly over coming months
  • Says this is not going to be easy as Fed is likely to be on hold and some ECB easing already priced-in
  • Base case is for a 20bps deposit rate cut in March followed by another 20bps in June; tiered deposit rate system and even longer duration refi loans likely
  • Also, expect a EU10b increase in monthly asset purchases and an extension of the program to June 2017; deposit rate floor will probably be removed for asset purchases
  • NOTE: Euro-Area prices decline most in year as ECB mulls easing
Alert: HALISTER1
Source: BFW (Bloomberg First Word)

Tickers
2539Z GR (European Central Bank)

People
Nick Kounis (ABN AMRO Group NV)

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