ECB rate decision is a major focus today and expectation is high for the central bank, to follow global peers, to deliver stimulus measures to ease coronavirus impact. Europe is in no doubt on fire now, with 12,462 coronavirus cases and 827 deaths in Italy. Prime Minister Giuseppe Conte tighten up country wide lockdown on Wednesday, closing all shops except supermarkets, food stores and chemists. He still sounded cautious as “we will only be able to see the effects of this great effort in a couple of weeks.”
Situation in other European countries are also worsening, with 2,821 cases and 48 deaths in France, 2,277 cases and 55 deaths in Spain, 1,966 cases and 3 deaths in Germany, 652 cases and 4 deaths in Switzerland, 629 cases in Norway, 514 cases in Denmark, 503 cases and 5 deaths in the Netherlands, 500 cases and 1 death in Sweden, 314 cases and 3 deaths in Belgium, 246 cases in Austria. The outbreak is already a serious blow to the domestic economy as well as a serious threat on production with supply chain disruptions. Also, tightening of financial conditions is worsening and broadening.
At this point, it’s unsure what more the ECB could do and how effect the new measures could be, given that interest rate already negative for long time and asset purchase restarted last year. ECB might opt for another -10bps cut in deposit rate and ramp up to QE to EUR 40B per month. There might also be targeted funding operations for banks.
Here are some suggested previews:
