Another depo rate cut is expected from ECB in order to boost the economic activities in the euro area. The ECB is likely to decide in favor of a higher volume of open-ended purchases in early December but to keep its powder dry regarding the deposit rate, .
The upward trend debt-to-GDP ratio has changed its direction this year for the first time since 2007. The euro area finance ministers are trying to reduce the debt burden further in 2016. They are expecting the economy to post better growth rate in coming years, as a result, debt-to-GDP ratio could be lower.
There is a limited scope for the central bank for further deposit rate cut, as it is already negative (-0.2%). Moro over, further reduction in deposit rate would lead to inflationary pressure in medium term in the economy, says Commerzbank, as the bank estimates the CPI inflation will be increased by 0.1 and 0.2 percent on a one and three year horizon respectively if the deposit rate is increased by a 50-basis-point.
