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ECB meeting preview: from words to action?
Kiron Sarkar
November 2, 2011

Hi guys,

We think the ECB should and will cut interest rates at tomorrow's meeting, although there is clearly a chance that the decision ends up being delayed until December. Some argue that J-C Trichet could have done his successor Mario Draghi a favour by easing in October, but in reality the ECB comes into the meeting with an easing bias in place and Draghi should have the flexibility to steer the committee how he sees fit. Economic news over the past month has gotten significantly worse, the EFSF remains a work in progress and unable to function properly, and only easier monetary policy can help provide some offset to the fiscal tightening taking place across the region. Whether or not the ECB actually cuts interest rates tomorrow, what will be of greater importance to us is anything Draghi will say in the Q&A on the ECB's bond purchase program. After the last few days especially, blunt reassurance needs to be given that the Italian and Spanish bond markets will not be allowed to go the way of Greece, Ireland and Portugal. Getting this message across will be Draghi's greatest challenge. Best regards, Marchel

Best
Kiron

 

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