Having stated following its last meeting that it stood ready to act, it would be a big disappointment if the ECB did nothing at the forthcoming meeting on May 2nd. On balance, we think that an interest rate cut is marginally more likely than not, but it will make little difference to the bleak economic outlook. Unconventional policies could be more effective, but these seem set to focus again on encouraging banks to lend. Bolder moves such as outright asset purchases are still not on the ECB’s agenda, unless they are sterilised and preceded by a bail-out request and the acceptance of strict fiscal conditions.
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