ECB preview: How much fireworks in September?

Despite re cent critical comments from several Governing Council members regarding the need for further easing at this point , we still think it is more likely than not that Mr Daghi will push through a “big package” at next Thursday’s meeting. While we share some of the skepticism with respect to the net effect of re- newed policy easing, Mr Draghi will stress the undershooting of inflation and the negative market reaction – in particular regarding the exchange rate – should expectations of a big package be disappointed. More specifically, we expect a 10bp cut in the deposit rate, a restart of asset purchases at a €30 billion monthly clip and the introduction of a tiering system for banks’ reserves at the ECB.