The ECB now seems to be taking deflation risks more seriously, implementing surprise interest rate cuts in September and leaving the door wide open to quantitative easing. With the economy apparently weakening further since then and the limited uptake at the first Targeted Longer-Term Refinancing Operation highlighting that the policy is unlikely to boost bank lending, the case for bolder policy support has strengthened. President Draghi is likely to offer more hints that full-blown quantitative easing is to come at the forthcoming press conference, although we doubt that the Bank will take the plunge before December.
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