ECB: Less focus on rates, more on volumes – Rabobank

23 March 2016, 09:41
Batur Asmazoglu
Research Team at Rabobank, notes that the ECB announced a comprehensive easing package
on 10 March, including a 10bp deposit rate cut, new 4-y TLTROs and an expansion of QE by EUR20bn to EUR80bn a month, with IG non-bank corporate sector bonds (CSPP) to be included in the list of eligible assets.

Key Quotes

“A tiered deposit rate regime did not make it and comments by Mr. Draghi in the press conference also indicated that the Council has been shifting away from rate instruments in favour of ‘unconventional’ options.

Nevertheless, the choice to add corporate debt also suggests that changing the parameters of the PSPP (notably, the deposit rate threshold and capital key) is not self-evident. We remain sceptical about the effectiveness of measures.

In the absence of fresh economic projections, we expect the 21 April meeting to be focused on details of the new TLTROs and, in particular, the CSPP.”
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