The ECB will leave interest rates on hold at 1.0% at its September policy meeting and is very unlikely to announce any new unconventional policy measures. The Bank is likely to treat recent signs of improvement in the economy with caution, supporting our view that monetary policy will remain as supportive as it is now for some time to come. Bolder unconventional policies seem increasingly unlikely to materialise, but the longer the ECB resists, the greater the risk of a sustained period of deflation in future.
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