Expectations mount for Draghi’s big stimulus package

With ECB President Draghi only last week noting that "we will do what we must to raise inflation", expectations are widespread for a multi-faceted easing. This is likely to include a 20bp deposit rate cut, and both a larger and longer asset purchase programme.

Some uncertainty remains about what other measures the ECB could adopt that could yet be clarified by judiciously-timed leaks. A two-tier approach to a reduction in the deposit rate is apparently being considered for larger balances.

"The ECB might also make changes to the main refinancing rate. Overall, the market consensus is mostly around the view that Draghi will not want to disappoint. Yet, any desire to keep some policy powder dry means that the checklist of announced measures could underwhelm, even if compensated by hints of future action. Meanwhile, Eurozone-wide inflation data (Wed) will provide an update in advance of the policy decision and updated ECB economic projections",notes Lloyds Bank.