ECB: HIGH (EXCESSIVE?) EXPECTATIONS

Editorial The ECB meeting will be closely followed next week. We expect an announcement of a number of measures (deposit rate cut , resumption of the asset purchase programme, etc.) aimed at boosting economic activity that is negatively affected by lower global growth. However, there is a risk of disappointment given the divergences within the ECB’s Governing Council. Some members cannot see the interest in another QE programme, or even in a further cut in the deposit rate to -0.75% as reflected in 1-year Eonia forwards while euro 10-year swap rates are -0.17%. In that respect , if the ECB does not deliver sufficient measures, there is a significant risk of long-term interest rates rising again. The euro 10-year swap has already risen by 15bp from the level of -0.30% in early September and the EUR/USD to above 1.10